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93–635 PDF 2005

S. HRG. 107–1144

H.R. 1542, INTERNET FREEDOM AND BROADBAND

DEPLOYMENT ACT OF 2001

HEARING

BEFORE THE

COMMITTEE ON COMMERCE, 

SCIENCE, AND TRANSPORTATION 

UNITED STATES SENATE

ONE HUNDRED SEVENTH CONGRESS

SECOND SESSION

MARCH 20, 2002

Printed for the use of the Committee on Commerce, Science, and Transportation

(

(II)

SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

ONE HUNDRED SEVENTH CONGRESS

SECOND SESSION

ERNEST F. HOLLINGS, South Carolina, Chairman 

DANIEL K. INOUYE, Hawaii 

JOHN D. ROCKEFELLER IV, West Virginia 

JOHN F. KERRY, Massachusetts 

JOHN B. BREAUX, Louisiana 

BYRON L. DORGAN, North Dakota 

RON WYDEN, Oregon 

MAX CLELAND, Georgia 

BARBARA BOXER, California 

JOHN EDWARDS, North Carolina 

JEAN CARNAHAN, Missouri 

BILL NELSON, Florida 

JOHN MCCAIN, Arizona 

TED STEVENS, Alaska 

CONRAD BURNS, Montana 

TRENT LOTT, Mississippi 

KAY BAILEY HUTCHISON, Texas 

OLYMPIA J. SNOWE, Maine 

SAM BROWNBACK, Kansas 

GORDON SMITH, Oregon 

PETER G. FITZGERALD, Illinois 

JOHN ENSIGN, Nevada 

GEORGE ALLEN, Virginia 

KEVIN D. KAYES, Democratic Staff Director 

MOSES BOYD, Democratic Chief Counsel 

JEANNE BUMPUS, Republican Staff Director and General Counsel 

(III)

C O N T E N T S 

Page 

Hearing held March 20, 2002 ................................................................................. 1

Statement of Senator Allen ..................................................................................... 13

Statement of Senator Boxer .................................................................................... 12

Statement of Senator Breaux ................................................................................. 8

Statement of Senator Brownback ........................................................................... 9

Statement of Senator Burns ................................................................................... 6

Statement of Senator Carnahan ............................................................................. 11

Statement of Senator Dorgan ................................................................................. 12

Statement of Senator Ensign .................................................................................. 16

Statement of Senator Fitzgerald ............................................................................ 17

Statement of Senator Hollings ............................................................................... 1

Statement of Senator Inouye .................................................................................. 4

Prepared statement .......................................................................................... 4

Statement of Senator Kerry .................................................................................... 14

Statement of Senator McCain ................................................................................. 2

Statement of Senator Nelson .................................................................................. 53

Statement of Senator Smith ................................................................................... 10

Statement of Senator Stevens ................................................................................ 5

WITNESSES

Dingell, Hon. John D., U.S. Representative from Michigan ................................ 23

Prepared statement .......................................................................................... 26

Tauzin, Hon. W.J. ‘‘Billy’’, U.S. Representative from Louisiania ........................ 17

Prepared statement .......................................................................................... 21

(1)

H.R. 1542, INTERNET FREEDOM AND 

BROADBAND DEPLOYMENT ACT OF 2001

WEDNESDAY, MARCH 20, 2002

U.S. SENATE, COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION, Washington, DC. 

The Committee met, pursuant to notice, at 9:35 a.m. in room SR–

253, Russell Senate Office Building, Hon. Ernest F. Hollings, 

Chairman of the Committee, presiding. 

OPENING STATEMENT OF HON. ERNEST F. HOLLINGS,

U.S. SENATOR FROM SOUTH CAROLINA 

The CHAIRMAN. The Committee will come to order. We will respond to our hearing on H.R. 1542, the Tauzin-Dingell measure 

that has been sent over from the House side. I am going to put this 

long statement that the staff has prepared for me in the record, to 

cover all the points. Let me just try to cover one. I notice that Senator Tauzin says that he wants to be assured it is not a monopoly 

or monopoly controled and that the users will not, as he said, suffer 

the penalties of monopoly unregulated service. 

I have the same concern. I am going to agree in a sense with my 

distinguished Ranking Member that the 1996 Act had not worked 

in that we have yet to take the major player, the Bell Company, 

and deregulate them. 

We thought at the time that we would use just exactly what 

Judge Green had used in the long distance market. He required 

that AT&T sell at a cold sale and there developed some 500 long 

distance carriers; got to be very competitive. AT&T actually 

downsized, made a bigger profit, and we saw the benefits of competition. 

However, we were totally deceived in that there has been really 

no effort whatsoever to get into the Internet services, the 

broadband service until recently and in some competition by the 

cable. Because they have been holding onto their monopoly. 

Let me give the representations that were given to us at the very 

time in February 1996 when John Clendenin, the Chairman of Bell 

South said, and I quote, ‘‘Bell South intends to aggressively compete for our customers’ long distance business. We are going full 

speed ahead and immediately offering Bell South long distance 

service to our satellite customers. And within a year or so, we can 

offer long distance to our residential and business wire line customers.’’

U.S. West, the head of that, I quote, ‘‘Customers have made it 

clear they want one-stop shopping for both their local and long disVerDate 0ct 09 2002 09:53 Dec 05, 2005 Jkt 093635 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 S:\WPSHR\GPO\DOCS\93635.TXT JACK PsN: JACKF
2

tance service. We are preparing to give them exactly what they 

have been asking for. U.S. West will be able to reach a reasonable 

solution on the builds checklist requirements in the majority of its 

states within 12 to 18 months.’’

Then the same with Ameritech Bell Atlantic. This is Jim Cullen, 

and incidentally he was the negotiator for the Southern Bell Company that I worked with over a 3-year period. 

‘‘This bipartisan bill can enable you to do one-stop shopping for 

your local and long distance phone service, cable service, and Internet access service. In short, we move closer to the wondrous promise of the information age and look to Bell Atlantic to take you 

there. The company would start offering long distance service outside its traditional region immediately and inside its region within 

a year.’’

Seidenberg, again, said, ‘‘Nynex will offer one-stop shopping for 

a full array of communications services, local, long distance, wireline, wireless Internet, video entertainment, information services; 

and customers will be able to package what they want the way 

they want it.’’

Pac Bell, I quote, ‘‘Pacific Telesys said it plans to be in the long 

distance market in 10 to 12 months.’’ And then SBC, ‘‘SBC’s incentive is the freedom to enter markets such as long distance that 

have been closed to us since the divestiture. The key to achieving 

that freedom is opening the local telephone market to competition.’’

That is exactly what is guaranteed by H.R. 1542: namely that it 

remain closed, and that is why it is not working. That is our problem today. As was previously noted by the Federal Communications Commission—the Bells still have 91 percent of the last line. 

Finally, to make the point, none other than I quote Chairman Tauzin on Page 576 of the Congressional Record just a few weeks ago 

when the bill passed the House. 

He was talking to Rep. Sensenbrenner. Quote, ‘‘He and I are 

equally committed to watch carefully and—at the performance of 

these companies and others to make sure that consumers have the 

benefits of competition and not the penalties of monopoly, unregulated service.’’ That is what we have is monopoly, unregulated service. 

And they are about to extend it to broadband where we have got 

dynamic competition. Eighty percent of the country has got it. They 

do not subscribe to it but that is the problem. And in that sense, 

Chairman McCain, I agree with you. It had not worked. That has 

been the big bottleneck. I yield to Senator McCain. 

STATEMENT OF HON. JOHN MCCAIN,

U.S. SENATOR FROM ARIZONA 

Senator MCCAIN. I thank you, Mr. Chairman. And I thank you 

for your commitment for many, many years to provide telecommunications services to all Americans at a lower price. 

If there has been a failure, it has not been because of your lack 

of effort and dedication to this proposition. As you and I have 

worked together for many years, the majority of our agenda is 

taken up with telecommunications issues. And this is a Committee 

that has very wide and broad jurisdiction, but there are no more 

vital issues to the future of this country. 

3

In 1996, Congress passed the first major overhaul of telecommunications policy in 62 years. Supporters of the Telecommunications Act argue that it would create increased competition, provide consumers with a variety of new and innovative services at 

lower prices and reduce the need for regulation. 

My principal objection to the Act at that time was that it fundamentally regulated, not deregulated the telecommunications industry and would lead inevitably to prolonged litigation. It has 

been 6 years since the passage of the Act. Six years since the passage of the Act but consumers have yet to benefit from lower prices 

or a competitive marketplace as promised, as promised by the Act’s 

proponents. 

In fact, local telephone rates are up 17 percent. Cable rates are 

up 36 percent. And some companies are now raising rates on basic 

long distance service. I believe that Congress must face reality and 

deal realistically with these obvious problems. 

The latest effort in the telecommunications industry is focused on 

purported need to accelerate the deployment of broadband services. 

A 2002 Department of Commerce report entitled ‘‘A Nation Online’’, states that less than 11 percent of Americans currently subscribe to broadband services. 

When it comes to these services, there is a stark disagreement 

about whether there is a supply problem, a demand problem, a 

combination of the two, or no problem at all. The one thing all parties agree on is that Americans and our national economy will benefit greatly from the widespread use of broadband services. 

Given broadband’s great promise, I believe we should make sure 

that the government is not impeding timely deployment of 

broadband services to more Americans. 

In order to accomplish this goal, a truly deregulatory approach 

cannot be narrowly focused on one particular sector of the industry. 

Rather, I believe that such an approach should seek deregulatory 

parity among all segments of the telecommunications industry and 

ensure that ultimately consumers will have more choices, higher 

quality, and lower prices. 

Finally, I commend FCC Chairman Michael Powell for his leadership in working to find ways to stimulate the roll out of 

broadband services across all industry segments. 

Under Section 706 of the Act, Congress instructed the Commission to, quote, ‘‘encourage the deployment on a reasonable and 

timely basis of advanced telecommunications capability to all 

Americans by utilizing regulatory forbearance, measures that promote competition in a local telecommunications market or other 

regulating methods that remove barriers to infrastructure investment’’, unquote. 

I believe that the Commission is working diligently to fulfill the 

obligations set forth by Congress in Section 706 of the Act. I thank 

the Chairman for today’s hearing. And I thank our friends, Congressman Dingell and Congressman Tauzin for appearing before 

us. And I hope that as a result we will work closely together to deregulate the entire industry, which should have been what happened in 1996 and unfortunately did not, at least if you look at any 

measurable observations of the effect of the Act. I thank you, Mr. 

Chairman. 

4

The CHAIRMAN. Thank you. The Chairman and Ranking Member 

of our Defense Appropriations Subcommittee have witnesses waiting. I have got the permission then to, out of order, recognize Senator Inouye. 

STATEMENT OF HON. DANIEL K. INOUYE,

U.S. SENATOR FROM HAWAII 

Senator INOUYE. Thank you very much, Mr. Chairman. I commend you for holding this hearing on this important measure. Regretfully as noted, I must be leaving to conduct another hearing. 

But before I do, I would like to say that I share your concerns 

about this measure. 

I ask unanimous consent that my full statement be made part 

of the record. 

The CHAIRMAN. It will be included. 

[The prepared statement of Senator Inouye follows:]

PREPARED STATEMENT OF HON. DANIEL K. INOUYE,

U.S. SENATOR FROM HAWAII

A preeminent goal of the Telecommunications Act of 1996 is the opening of the 

local telecommunications market to competition. Competition is the key to sparking 

innovation, improving service, and reducing prices for residents and businesses. It 

also is helping to drive the rollout of broadband services. 

Regrettably, we have yet to realize the enormous benefits of competition, primarily because of the obstacles that have been placed in its way by the bells since 

the passage of the 1996 act. The Bells have dragged their feet every step of the way; 

instead of embracing competition, the Bells have sought to squelch it by delaying 

access to their networks by companies seeking to compete with them. 

The record shows that when given a chance to compete, the new competitive local 

exchange carriers—or CLECS—have made progress in offering competition in the 

local markets. In New York, CLECS have captured 23 percent of the local telecommunications market; in Texas CLECS have gained a 14 percent market share; 

in Massachusetts 12 percent, and in Pennsylvania 13 percent. And what has been 

the result of these developments: lower rates and a higher quality of service to customers, as was reported in a survey by the Yankee Group. Unfortunately, the success of CLECS has been limited by the fact that former Bell companies have met 

the market opening provisions of the 1996 Act in only ten states. 

With that said, H.R. 1542 passed the House in February. My reading of the bill 

suggests that it assumes that competition should only be between local phone monopolies and cable companies, on the ground that consumers are best served by having two huge players in a market. Having multiple players in a given industry results in consumers having more choice, better service, innovative products, and 

lower prices. 

Furthermore, the Bells claim they need the legislation in order to more rapidly 

deploy broadband services. They argue it is too costly to upgrade their infrastructure and at the same time open their network to competitors. However, they make 

these claims, not withstanding the fact that the Bells, in some cases, already have 

deployed DSL technology to more than 70 percent of their market areas. This statistic alone suggests that there is no need for the House bill. 

The Bells claim that, through the House legislation, they are merely seeking regulatory parity with cable companies. However, while the cable industry is working, 

even in the absence of a statutory requirement, to open their networks to competition, the Bells, on the other hand, continue to stifle competition in their main markets. Moreover, the Bells continue to dominate the lucrative business data market—

a market in which the cable industry does not compete and where CLECS are the 

Bells’ only real competitors. The reality is that the Bells lag behind in the residential market only because they waited to deploy DSL service—and deployed only 

after they were faced with competition from CLECS and cable. 

Having multiple players in a given industry results in consumers having more 

choice, better service, innovative products, and lower prices.

• In the wireless industry, the companies are elbowing each other out of the way 

to offer new calling and internet features at lower prices;

5

• as competition became intense in the long distance sector, companies began offering a variety of calling plans, collect call services, and discount cards; and

• as the market opened in the satellite industry, satellite television companies 

began providing free installation and highly attractive programming packages.

We look forward to a day when consumers are courted in the same way with competitive offers for local telecommunications voice and data services—from multiple 

local telecommunications companies, multiple cable companies, multiple satellite 

companies, multiple wireless companies, and multiple internet service providers. 

If our concern is for consumers, I believe our choice is clear—simply allow state 

and federal regulators to enforce the law. State and federal regulators, however, 

must have the courage to do just that. Taking any action such as those proposed 

in H.R. 1542 would only be a major step backwards from the ultimate goal of bringing competition to the local market place, and truly unleashing the power of the 

Internet.

Senator Stevens. 

STATEMENT OF HON. TED STEVENS,

U.S. SENATOR FROM ALASKA 

Senator STEVENS. Thank you very much, Mr. Chairman. I too 

must join Senator Inouye at the other hearing. I want the record 

to show I have some serious problems with H.R. 1542. I do not 

think that it is correct in its findings which state that the 1996 Act 

was designed to promote competition for local voice services only. 

To me that is not correct. We had numerous hearings over the 

four years before we passed the Telecom Act where we discussed 

all facets of the communications system, fiber optics packets, package switching, the Internet as a component of the information highway. 

We had 25 million people on the Internet in 1995, and [Title II 

of the 1996 Act deals extensively with the Internet and that pornography, which shows that we clearly knew about the Internet 

and package switch networks that provide the Internet services] 

when we finished the 1996 Act. 

And it is no accident that the Telecom Act makes no distinction 

between voice and data networks. We knew then that data would 

surpass voice, and we wanted to be sure that pro-competitive rules 

applied to all types of networks. 

The statute specifically says regardless of the facilities used in 

the definition of telecommunication service. And I think it means 

just what it says. 

This bill would allow the regional Bells into the long distance 

markets without first opening their local markets to competition, 

and that is just what we thought we were doing when we passed 

the 1996 Act. The bill to me as it stands now would send the wrong 

message. It would preempt all form of federal and state regulation 

designed to carry out the purpose of the Act in the name of deregulation. 

I do think that we have to take a look at what this does, because 

as a practical matter the core of the 1996 Act was competition, regulatory parity, and universal service all predicated on common carrier regulation with the underlying networks and web being involved. 

I am concerned. I disagree with Senator McCain. I do believe the 

FCC is wrong to deregulate entirely the common carrier facilities 

to provide Internet access. The net result will be in my opinion that 

6

the universal service and pro-competition divisions we adopted in 

the 1996 Act will cease to apply to the service used to provide 

Internet access. 

And the FCC then is going to have to devise its own rules to 

safeguard consumers. We will be right back where we were in 1995 

before the 1996 Act. And I do not think that is a good result. 

I do believe we should force the compliance with the 1996 Act 

and proceed from there. I do agree with the end objective of Senator McCain, and that is to find a way to eliminate the type of regulation that is unnecessary. But until we have a concept that this 

law is being followed, I do not think we will have that. 

I do hope that we will find a way to work with our two friends 

from the House. They have been very cooperative with us in trying 

to seek out our common objectives in a series of meetings we have 

had with members of the telecommunications industry, but I just 

disagree with the basic finding of the Act and the bill that was 

passed in the House. 

And therefore, I could not support it as it stands. 

The CHAIRMAN. Senator Burns. 

STATEMENT OF HON. CONRAD BURNS,

U.S. SENATOR FROM MONTANA 

Senator BURNS. Thank you, Mr. Chairman. I thank you for this 

hearing today. 

I want to commend Chairman Tauzin and Ranking Member Dingell for their hard work in passing H.R. 1542 in the House. I know 

they have been tenacious about that and in trying to do some 

things to ensure a build-out of broadband services into our country. 

I particularly applaud them for focusing attention on the topic of 

vital national interest, how best to foster universal broadband deployment. I remarked previously that the bill deserves a full and 

fair debate in the Senate. And today’s hearing constitutes the beginning of that process. 

I continue to have concerns about H.R. 1542 and do not support 

this legislation in its present form. But the goal of the bill is a worthy one. And I look forward to working with both of you as this legislation moves down the line. 

Clearly, broadband is the central defining telecommunications 

issue of today. We are rapidly transforming from an information society of text and words, to one of video and dynamic multimedia. 

The development of this rich media is only possible through a national broadband network. And this network would be as important 

to the national destiny as the building of the railroads in the 19th 

century, and the Rural Electrification Act in the 20th century. 

Universal broadband should be the national priority early in this 

century, the same way as putting a man on the moon was a national priority in the last one. 

The question then is how to achieve this vision of universal 

broadband. As I remarked, I have several concerns about H.R. 

1542, particularly the preemption of all state public service commission authority to regulate the rates, charges, terms and conditions of high speed data services. 

7

Given my experiences with the Bell Operating Company currently serving Montana, I am not at all confident that this full deregulation would serve the consumers. 

In fact, until very recently, it had deployed advanced services in 

a grand total of one Montana city. And that is in Helena, despite 

years of promising more rapid deployment of broadband. 

In stark contrast, there will soon be 121 small Montana communities that will have advanced services, courtesy of the Montana’s 

independent and cooperative telephone companies. Included in this 

list are rural communities such as Circle, Mulda and Plentywood. 

And let me tell you, those are not metropolises. 

[Laughter.] 

Senator BURNS. Now, given this positive history of smaller operators, I fully support the Senate provision being considered in the 

farm bill conference that provides stable funding for low-interest 

broadband loans administered by the Rural Utility Service. 

The Senate bill takes the existing broadband pilot program and 

makes it permanent and provides stable funding for the next 5 

years. This is perhaps the most significant action that Congress 

can take to stimulate broadband deployment in rural areas. 

The fact is that there are companies, local cooperatives and new 

startups that want to serve rural America and deploy those 

broadband services that will create jobs and stimulate the economy. 

Low-interest loans are one of the most effective ways to get 

broadband to rural America. 

I should add that the RUS telecom program has never issued a 

bad loan in over 50 years. The government has actually made 

money off of those loans. Also because of existing RUS lending 

rules, these loans do not go for services that are duplicated. 

So we are not subsidizing a competitor against someone else. The 

loans will only go to service what would otherwise not happen. 

Another approach I believe that has a lot of merit is offering tax 

credits for rural build-out of broadband. I have worked closely with 

Senator Rockefeller on S. 88 which would create tax incentives for 

the deployment of high-speed Internet services to rural, low-income 

and residential areas. 

The bill would grant a 10 percent credit for expenditures on 

equipment that provide a bandwidth of 1.5 megabytes per second 

to subscribers in rural and low-income areas, and a 20 percent 

credit for the delivery of 22 megabytes to these customers and 

other residential subscribers. This bill has over 64 co-sponsors. 

Finally, I want to touch on the idea that has been offered that 

the authors of the Telecommunications Act of 1996 somehow never 

considered Internet during the debate surrounding the bill. Well, 

folks, I was there, and as many of us were on this Commerce Committee here. And this simply is not the case. In fact, I authored 

Section 706 of the Act with the specific aim of promoting 

broadband technologies in rural areas. And I think it is important 

to keep this historical context of the Act in mind when moving forward on critical issues. 

Mr. Chairman, thank you for holding this hearing today. And I 

look forward to working with all the principals——

The CHAIRMAN. Thank you. 

8

Senator BURNS.—so that we can ensure that broadband does 

make it into rural areas. 

The CHAIRMAN. Thank you. Senator Breaux. 

STATEMENT OF HON. JOHN B. BREAUX,

U.S. SENATOR FROM LOUISIANA 

Senator BREAUX. Thank you very much, Mr. Chairman. Thank 

you very much for having this hearing. I would not miss it for all 

of the tea in China. You know, Washington may——

The CHAIRMAN. Let us get to the entertainment. 

[Laughter.] 

Senator BREAUX. You are right. Washington may not get the 

Mike Tyson heavyweight fight, but we have certainly got a heavyweight battle today between long distance carriers and the local 

carriers. 

I think we all want to talk about how everybody is committed to 

one thing. We all want to have a level playing field. I must have 

heard the term, ‘‘let us have a level playing field for all the competitors’’ since we started working on this legislation back when we 

first passed it. 

And we still continue to say, ‘‘well, we want a level playing field.’’ 

And you ought to look at what is happening. I know in my State 

of Louisiana in a local service area I have got the cable companies, 

which are clearly monopolies, providing video, movies, communications over cable, as well as broadband Internet service. 

They are a monopoly. They are not regulated. If the local phone 

company wants to do that, they have to meet all kind of rules and 

regulations and standards. You have got satellites doing the same 

thing in local communities that are providing broadband services, 

they are providing movies and videos. And they are not regulated 

and no one is opposing that. 

So it seems that what you have right now in fact is a very 

unlevel playing field that the legislation is trying to address. I am 

not sure it is the perfect answer to the problem in creating a level 

playing field, but I think certainly something has to be done in this 

area. 

When local companies go into new broadband services having to 

sell those services to competitors at less than the cost, is that a 

level playing field? It does not seem like it is to me. 

If I was in business and had to come out with something new 

and innovative and had to sell it to my competitors for below what 

it costs and then they say, well, go compete on a level playing field, 

well, that is not a level playing field. And I think that there ought 

to be some way to establish what I think everybody can agree with 

and that is equal competitors. I want competition. I do not want 

to have just one phone company. I do not want to have just one 

cable company. But we have got that. 

And I think that is patently unfair and look forward to the testimony. Thank you, Mr. Chairman. 

The CHAIRMAN. Senator Brownback. 

9

STATEMENT OF HON. SAM BROWNBACK,

U.S. SENATOR FROM KANSAS 

Senator BROWNBACK. Thank you, Mr. Chairman. And thank you 

for holding the hearing today. You did not have to do this, to hold 

this hearing, but it is good that you did so that we could get into 

this debate. And I think it is a good debate. We need to have this 

debate. 

As I look at how we can grow our economy in this country over 

the next several years, I think this issue of broadband deployment 

and high-speed Internet access is one of the key ways that we can 

really grow this economy, along with issues like trade and some 

other items there. 

I think this is one of the really key debates. And we are all, I 

think, kind of struggling with the past Act and we are saying, well, 

it covered this issue, it covered that issue. It did this. It did not 

do that. 

I would ask, I think we all ought to look at where we are today 

and how we can grow this economy and what do we need to do to 

move forward, not whether somebody complied with what was the 

intent of this Act or that one. 

What we have got is a situation that is different today than it 

was in 1996 when the Telecom Act passed. That is not to say that 

we just look past the Telecom Act. We do not. It is law. It is as 

it should be. 

But we have got a different situation that is out there today. And 

I would hope we could look just at that. Our society is transitioning 

from an analog to a digital world characterized by bandwidth intensive Internet applications and broadband connections. 

This transition I believe holds great promise for continued industry innovation and productivity as well as opening up a whole new 

world for consumer and community access to information, entertainment, education, health care. 

The digital revolution—the emergence of broadband 

connectivity—could be the largest factor in the continued economic 

growth and development of our nation in the 21st century. 

Broadband connections are having a powerful impact on underlying service industries. Cable TV, wireless, satellite and telephone 

companies are converging with each deploying new technologies 

that will permit them to offer the same voice, video and data services over their respective platforms. 

Broadband connections will enable cable TV subscribers to make 

phone calls over the cable network, and telephone subscribers to 

watch multi-channel video over the telephone network. Broadband 

could usher in a new era of intermodal competition in telecommunications. 

Incumbent local telephone companies are heavily regulated in 

the broadband space. And their cable competitors are not. This regulatory disparity saps incentives. Telephone companies and consumers are the people that suffer for it. 

Broadband services offered by incumbent phone companies are 

available only sporadically and tend to be less capable than the existing and anticipated services of their cable competitors. 

10

This ensures that phone companies that exist with existing connections to most homes in America are not putting real competitive 

pressure on their intermodal competitors. 

These developments raise the ultimate question as put forth by 

the Tauzin-Dingell bill and by legislation that I put forward last 

year, the Broadband Deployment and Competition Enhancement 

Act of 2001. And that is this question: How do we balance our commitment to the Telecom Act’s, local telephone market opening provisions which everybody agrees with, yet also recognize and provide 

for the continued deployment of intermodal competition which everybody around this table would agree is taking place at this point 

in time now. 

I think that is the central question that we should focus on. And 

I would hope that all of us working together could see ways that 

we could come up with that solution. 

I do not think that should be an overly difficult process for us 

to do. I think tax credits are important as Senator Burns talked 

about. Loan guarantees I think are important as well on this as a 

number of other people have cited. 

Yet, I also believe that regulatory reform is going to have to 

serve as one of the cornerstones to be able to get this done. And 

I would really hope that we as members looking at the national 

economy (and I think all of us would agree this is one of the major 

things that can grow this economy in the future to make it a competitive force), we should be able to craft those tools that we have 

(whether it is tax credits, loan guarantees, regulatory incentives, or 

deregulation) to be able to come up with a national broadband 

strategy that helps us move this economy and this industry on forward. 

I think we ought to seek to do it just that way. Thank you, Mr. 

Chairman. 

The CHAIRMAN. Let the record show I am a co-sponsor of the 

Burns’ bill. Senator Smith. 

STATEMENT OF HON. GORDON SMITH,

U.S. SENATOR FROM OREGON 

Senator SMITH. Thank you, Mr. Chairman. I was not a Member 

of this Committee in 1996 when the Act was passed. But I have 

seldom encountered a more technical and complicated issue than 

this. And so I am here to learn and listen and anxious to hear our 

witnesses, so I will be very brief. 

I think that access to broadband will truly determine whether a 

community flourishes in the new economy or is left behind. I thank 

you, sir, for this hearing because we are now beginning to work on 

closing the digital divide that will help ensure all Americans have 

choices for high-speed Internet services. 

I am concerned that the service disparity may be growing wider 

and wider throughout this country and potentially affecting rural 

America. 

The CHAIRMAN. Senator Smith, if you would hold just a minute. 

I understand, Billy, there is a vote on in the House and there is 

about 10 minutes left. If you all want to make that vote while we 

finish up with these opening statements? 

11

Mr. TAUZIN. I think it is a vote on the journal, Mr. Chairman, 

and we are OK to pass on it. 

The CHAIRMAN. Thank you. Excuse me. I apologize. 

Senator SMITH. That is fine. Mr. Chairman, I want to make sure 

that no one is left behind in the new economy. Millions of Americans in small towns and rural areas and inner cities are blocked 

at the on-ramp to the information superhighway because they just 

cannot get broadband services. 

And while I am still weighing some of the difficult issues implicated by the Tauzin-Dingell bill, I am certain of one thing: public 

policy needs to encourage all potential providers to deploy new last 

mile broadband facilities. 

And that includes the incumbent phone companies and the competitive local exchange carriers. We need to continue to debate the 

issue to find ways to encourage more investment in competition. 

Making high bandwidth, high-speed broadband widespread and affordable is going to require tens of billions of dollars of risky investment by any company in the telecommunications industry. 

The companies who take the risk of deploying the last mile of 

broadband facilities should get the benefit if they succeed. 

I thank Chairman Tauzin and Representative Dingell for taking 

the time to appear before this Committee. And I thank you, sir. 

The CHAIRMAN. Thank you. Senator Carnahan. 

STATEMENT OF HON. JEAN CARNAHAN,

U.S. SENATOR FROM MISSOURI 

Senator CARNAHAN. Thank you, Mr. Chairman, for holding this 

hearing today and for your leadership on these issues. I am pleased 

that we are continuing to consider the issue of broadband highspeed Internet services. As policymakers, we must remain focused 

on how we can help our nation, our entire nation, realize the vast 

benefits that high-speed Internet services offer. 

It is important that we do so while maintaining robust competition in the provision of local telecommunications services. First and 

foremost, we need to ensure that current generation broadband 

services are available to all segments of the population. We must 

look at how to ensure that the benefits of broadband are available 

in rural America, in our inner cities and to lower income Americans. 

We should also consider how we can generate increased demand 

for the services that are currently available. The Congressional 

Record, I am sorry, the Congressional Research Services reports 

that while approximately 85 percent of households have access to 

broadband services, less than 15 percent choose to subscribe. 

At the same time, Mr. Chairman, we should be looking ahead at 

promoting the roulette of even more advanced broadband services. 

We need to redouble our commitment to improving the capability, 

reliability, and availability of high-speed data networks. 

In doing so, we should ensure that our policies reward innovation, encourage investment and promote job creation. Hastening 

the deployment and utilization of high-speed Internet services has 

the potential of reinvigorating our economy and fueling economic 

expansion. 

12

Broadband can spur growth by creating jobs, educating our work 

force and increasing productivity. If America is going to continue 

to lead the way in the new economy, we must focus on a pragmatic, 

common sense broadband agenda that we can enact now. 

Again, Mr. Chairman, I appreciate your leadership on this timely 

issue and I look forward to hearing from our witnesses. 

The CHAIRMAN. Thank you. Senator Boxer. 

STATEMENT OF HON. BARBARA BOXER,

U.S. SENATOR FROM CALIFORNIA 

Senator BOXER. Mr. Chairman, I will be very brief. I want to see 

affordable broadband deployment as soon as possible. I agree with 

my colleagues who said this is crucial for our economy. And I want 

to see it in rural areas and I want to see it all over the country. 

But I want to see it in a way that is fair to consumers and that 

means competition. Mr. Chairman, in California 45 percent of our 

people have no access to cable modem service, no access. So if we 

get a situation where we freeze that and there is no competition, 

45 percent of my state is going to be disadvantaged. 

And we have 34 million people in our state. So this is a very important point. So I am concerned about Tauzin-Dingell because essentially we freeze in that monopoly situation in 45 percent of my 

state. 

So in conclusion, three principles will guide me as we reach a solution. That would be swift deployment, in other words a policy 

that would lead to swift deployment, consumer support for what we 

do, and competition. Thank you. 

The CHAIRMAN. Thank you. Senator Dorgan. 

STATEMENT OF HON. BYRON L. DORGAN,

U.S. SENATOR FROM NORTH DAKOTA 

Senator DORGAN. Mr. Chairman, thank you. There is a certain 

pageantry about opening statements in the Senate, especially when 

we have an audience of House colleagues. 

I must say, as I said before, I am so tired of in the morning 

standing before a mirror shaving with the television set on and 

hearing about Tauzin-Dingell. 

[Laughter.] 

Senator DORGAN. The one side describes it as a cure for hiccups 

and gout and virtually everything else that ails mankind, and the 

other says it is a precursor to economic collapse. 

We have been listening to these claims for, what, 2 years now. 

I have no idea how much money has been spent for and against 

that bill, but simply the bill is not going to pass the U.S. Senate. 

That is a starting point. 

And I think my colleagues have described it, a circumstance 

where we have all had some tough experiences with deregulation 

in areas where we have had in North Dakota for example we deregulated in this country the airlines, and we ended up with less 

service that cost more. We deregulated the railroads, we end up 

with less service that costs more. We have had really a bellyful of 

deregulation. What we really want is an opportunity to have the 

build-out of advanced services. And I must say to my colleagues, 

I was dismayed to see in Congress Daily this a.m. that Tauzin-DinVerDate 0ct 09 2002 09:53 Dec 05, 2005 Jkt 093635 PO 00000 Frm 00016 Fmt 6633 Sfmt 6601 S:\WPSHR\GPO\DOCS\93635.TXT JACK PsN: JACKF
13

gell supporters are sending a signal to senators that they are going 

to strip this provision out of the Ag Bill, as my colleague from Montana described. 

They are going to do that so they will send a message to Senators that they will not get anything on broadband without accepting Tauzin-Dingell. There are a lot of ways to solve this issue. 

There are many different approaches. 

I have introduced The Broadband REA Program, part of which 

is now in the Ag Bill and conference. That is one approach. There 

is a tax credit approach. There are several different ideas. 

I think in the end all we care about is an aggressive, robust 

build-out. And that is not going to happen in my judgment with 

Tauzin-Dingell because that is not going to pass the Senate. I am 

anxious to hear the witnesses. I will defer the rest of my statement 

later. 

The CHAIRMAN. Senator Allen. 

STATEMENT OF HON. GEORGE ALLEN,

U.S. SENATOR FROM VIRGINIA 

Senator ALLEN. Thank you, Mr. Chairman. Thank you for calling 

this hearing today. And I want to thank both Congressman Tauzin 

and Congressman Dingell for appearing here today. 

I want to associate myself with the sentiments expressed by Senator Burns. They are pretty much the way I look at it, and also 

Gordon Smith, having not yet made a decision on this as we are 

trying to keep track of who is for and who is against it. 

I think we all agree that the rollout of greater access to 

broadband is absolutely essential for our country, for people, for 

communications, for education, for medical services and in making 

sure there is no digital divide based upon where people live. 

Looking though at the current landscape of broadband, the number of subscribers continues to increase at a relatively healthy rate. 

However, the number remains small in comparison to the number 

of subscribers who have access to broadband service. 

It previously was mentioned that the FCC in particular found 

that high-speed services were available in each of the 50 states. 

Approximately 78 percent of the ZIP codes in the U.S. have access 

to high speed services. 

However, only about 10 percent of households or approximately 

10 million people subscribe to broadband service. Now, this would 

suggest a significant lack of consumer demand, to some extent corporate demand, but mostly consumer demand that I think needs to 

be addressed to further advance broadband deployment. 

This is clearly an economics issue. There is a major investment 

necessary to deploy broadband, especially if you are digging a lot 

of dirt, as Senator Burns says, with fiber optics and you want to 

get a rate of return on it. If people do not see a value in paying 

higher prices for monthly broadband service than their current 

Internet service, that is simply a consumer demand matter. 

The point is that this is not a simple question of, if you will, if 

you build it they will come. Because that is obviously not happening. 

Now, we are all eager to find ways to promote the build-out of 

broadband capabilities. There are a host of other complex issues beVerDate 0ct 09 2002 09:53 Dec 05, 2005 Jkt 093635 PO 00000 Frm 00017 Fmt 6633 Sfmt 6601 S:\WPSHR\GPO\DOCS\93635.TXT JACK PsN: JACKF
14

yond Tauzin-Dingell that have to be addressed such as the availability of compelling content. Spectrum allocation reform is clearly 

a part of it. And we had a hearing on intellectual property protection that hopefully would be handled by the private sector but nevertheless if we eventually get more compelling content, then people 

will see a value in purchasing broadband because it will be more 

valuable to them. 

I also understand part of this bill is beyond the supply side concerns. And it does have to do with competition. Most people who 

have access to broadband currently—two-thirds I believe receive it 

from cable sources, as Senator Boxer of California talked about 

their situation in that state. I understand that the incumbent local 

exchange carriers are looking to change this by amending both the 

Communications Act of 1934 and the Telecom Act of 1996. 

I have not yet determined that by simply amending both these 

communications acts, and providing the so-called ILECs with deregulatory incentives will miraculously cure us of the broadband 

deployment problem. I do think we need to take reasonable action 

from a business economics perspective as well as a rural community empowerment perspective. 

And I think that, personally, Senator Rockefeller’s bill is a good 

approach with incentives to handle that. 

But the point is that there are major stakeholders in this. They 

all need to be considered. And I am not sure which we will come 

out for. That is what we take votes for, to find what is the best 

and most preferred route. 

I thank you for having this hearing. And I look forward to hearing comments in this hearing and many other hearings on how we 

all can effectuate the goal we agree upon. We may disagree on 

some of the methods of doing it. But thank you, Mr. Chairman. 

The CHAIRMAN. Thank you. Senator Kerry. 

STATEMENT BY HON. JOHN F. KERRY,

U.S. SENATOR FROM MASSACHUSETTS 

Senator KERRY. Mr. Chairman, thank you very much both for the 

hearing as well as for your long-term leadership on this. I will not 

be too long but let me say a couple things, if I may. 

I know that you, Senator McCain and others have said very 

clearly how you feel about the road traveled with respect to the 

Bells and their obligations and promises. I think everybody here 

would agree that the expectations of 1996 have fallen short in 

many regards. I support your observations with respect to that, Mr. 

Chairman. 

But I do think we have to also recognize, I mean, I remember 

that 1996 debate as other members here do. And I think the truth 

is that the world we were talking about then, and despite some of 

the language have come back and reviewed it that seems to embrace a broader understanding of the marketplace. 

The truth is we were mostly focused on telephony. We really did 

not have the full vision in front of us of the world we are operating 

in today. 

And so we have some very powerful entities that are fighting 

over the access to market share and ultimately the distribution of 

15

revenue that will come from that. And we have really got a couple 

of different worlds competing here and now. 

I mean, it has changed. I do not support Tauzin-Dingell as it is 

now, nor do you, Mr. Chairman, or other members here. But I 

think that our friends in the House have frankly done us all a significant service by bringing to the table a critical debate for all of 

us about what the architecture is going to be like now and what 

steps we are going to take to create a true advanced network architecture. 

You have got the Bells versus the competing carriers struggling 

with telephony. And most of the focus, Mr. Chairman, and so to 

your disappointment is in the field of telephony. But then you have 

the Bells versus cable, satellite, wireless, et cetera, in data. 

And data, as we all know, is the battleground today. To some degree I think it is honest to say that telephony is perhaps even just 

an ancillary. There is still revenue there but it is not what this battle is about. 

And so for all of us here on this Committee, I would like to see 

us think about this in a larger sense, if we could. There are roughly 

10 million homes that presently subscribe to some form of highspeed Internet service. And that marketplace is dominated by two 

industries: The cable industry with its cable modem service and 

then the phone companies with DSL. 

The cable companies have approximately 70 percent of market 

share and they offer service to about 80 percent of American 

homes. The phone companies have about 30 percent of market 

share and they offer service to about 50 percent of American 

homes. 

Both of them provide offerings to consumers with bit speeds of 

about 500 kilobytes per second which is OK. It is good for speedy 

web browsing, but frankly it is limiting otherwise. 

Now, the way I think we ought to sit through this is sort of think 

of this a little in larger terms. And I agreed with Senator 

Brownback. There has to be a way for us to find a way through 

the pricing mechanisms and the regulations scheme currently of 

the FCC. 

A recent study by the OECD found that the U.S. is now fourth 

in the world behind Korea, Canada and Sweden in per capita 

broadband subscribership. In Japan, NTT, Tokyo Electric Power 

and other companies are competing to roll out fiber to the homes. 

The Korean Government has an official policy to provide 20 

megabytes per second to 85 percent of Korean homes by the Year 

2005. Our situation is embarrassing by comparison. 

As opposed to Korea which has a goal of the 20 megabytes per 

second system, we seem to be satisfied with competing systems 

that are less than 3 as valuable. 

In contrast to Japan where companies are rolling fiber to the 

home, we are still debating how to get fiber anywhere outside the 

central office. And at the end of 2001, there were only 16,000 fiber 

to the home residences in the United States. 

Now, aside from the benefits of movies, high-definition television 

and home entertainment, advanced speeds would provide tremendous advances for our country in terms of telemedicine, distance 

learning, worker training and a myriad of other applications. 

16

Some people say there is no market for that. I do not believe 

that. And I do not think most people here do. 

Another problem that is ancillary to that that we have not yet 

dealt with is the question of the protection of what is on 

broadband. One of the reasons some people who have the capacity 

are not putting more interesting things on broadband is they cannot protect it. 

So this Committee has a very important obligation in front of 

them, Mr. Chairman, which is to try to find the midstream in a 

sense, that sort of fairness in how you impact and do not choose 

winners and losers but in fact create a structure that provides adequate incentive. 

Pat Moynahan, Jay Rockefeller and I sat down to write an incentive for the deployment of those systems. We came through the tax 

credit group but there are other ways to do it. And I hope, Mr. 

Chairman, these hearings, while this bill is not going to pass in its 

current form, my hope is this Committee working with you and 

under your leadership can find a way to satisfy the remaining telephony needs but not shortchange the longer-term broadband 

needs of the nation. And I thank you. 

The CHAIRMAN. Thank you. Senator Ensign. 

STATEMENT OF HON. JOHN ENSIGN,

U.S. SENATOR FROM NEVADA 

Senator ENSIGN. Thank you, Mr. Chairman. I think that holding 

this hearing today is very valuable. One of the most, I think it was 

mentioned before, one of the most complex issues that I have certainly come across simply because you have one side telling you a 

set of facts and looking at it one way and the other side saying virtually the same facts, sometimes maybe with a little different spin 

on it, and the exact opposite consequences as a result of those facts. 

Our job, I believe, as policymakers is to determine what is going 

to be the best policy for America citizens, American business and 

as Senator Kerry was just talking about, for keeping America competitive in the global marketplace. 

You know it is—the term has been said build it, we use this in 

Las Vegas, build it and they will come. I think if we look at the 

deployment of broadband, it is deploy it and they will invent it. 

There are so many technologies and applications that we cannot 

even foresee today that if we have broadband deployed in a much 

greater degree today than it is, that we will have technologies we 

cannot even fathom today. 

But also one of our jobs when we do this legislation is to prevent 

that dangerous law, the most dangerous law of all it seems up 

here, and that is the law of unintended consequences. 

Sometimes we do things up here without knowing what the adverse consequences of what our actions are going to have and so 

we have to be very careful when we are messing with such a huge 

part of the marketplace. 

So I think that some of the stated goals here I would agree with. 

Affordability for the consumer and having a lot more competition 

in the marketplace. Those goals are laudable goals and that is 

what we should be looking at doing. 

17

* The information referred to was not available at the time this hearing went to press. 

And I think it is going to be important for all of us, whichever 

position anybody stakes out is to be willing to work together and 

look for the benefit of Americans when we come with final legislation. And I will submit my official statement for the record without 

objection.* 

The CHAIRMAN. Senator Fitzgerald and Senator Lott, I have got 

a note from Senator—as you have heard, Chairman Dingell has to 

leave here momentarily. If you all would make it short, I would appreciate it. Senator Fitzgerald. 

Senator LOTT. Let me just say, Mr. Chairman, I would like to 

yield my time actually because I would like to hear the witnesses. 

The CHAIRMAN. That’s fine. Good. How about Senator Fitzgerald? 

STATEMENT OF HON. PETER G. FITZGERALD,

U.S. SENATOR FROM ILLINOIS 

Senator FITZGERALD. Yes. I just want to welcome you to the Committee. The one thing I will be looking at is I am simply concerned 

about the idea of kind of moving the goal post on people who have 

already invested a lot of money, created companies, done public offerings to create competitive local exchange carriers, and I am concerned about the perception that we are changing the rules in the 

middle of the game. 

So I would appreciate your addressing that issue. And I want to 

compliment you on the hearings you did on Enron over in the 

House. I thought you both did a great job. Thank you. 

The CHAIRMAN. Thank you. Chairman Tauzin and Mr. Dingell? 

Chairman Tauzin, you ordinarily would go first if you want to yield 

to——

Mr. TAUZIN. I have suggested to my colleague——

The CHAIRMAN. We have a note there that you have to leave. 

Mr. DINGELL. I will wait my turn. 

The CHAIRMAN. The Committee welcomes you both. There are no 

two finer Congressmen, no two finer leaders in the Congress. I 

have said time and again the only thing I like about H.R. 1542 are 

the authors. 

[Laughter.] 

The CHAIRMAN. Mr. Dingell, we welcome you and would be delighted to hear from you at this time. 

Mr. TAUZIN. I think John asked that I go first. 

The CHAIRMAN. OK. 

STATEMENT OF HON. W.J. ‘‘BILLY’’ TAUZIN,

U.S. REPRESENTATIVE FROM LOUISIANA 

Mr. TAUZIN. Mr. Chairman, first let me express to you our mutual respect and admiration of you and this Committee. Mr. Dingell 

and I come as Mr. Brownback said, to a hearing that you didn’t 

have to call. And I want to thank you for calling this hearing, giving us a chance to come and begin this debate. Because it is a critical one for our country. 

I also want to make it clear that we didn’t come to blow steam. 

We didn’t come to do anything but agree with you that our goals 

are mutual. We want competition both in the local market and we 

18

certainly want to build a competitive frame upon which broadband 

services can be built, delivered, and in fact new services and contacts may be developed for the benefit of our country. 

And third, to my Cajun friend from Louisiana, Mr. Breaux, we 

certainly don’t expect the Tyson-Lewis fight here. Your ears are 

safe, and so are ours, I hope. 

[Laughter.] 

Mr. TAUZIN. We have struggled too hard to come here, Mr. Chairman, and leave for a vote on the Journal, I assure you. And we 

deeply appreciate the chance to visit with you. 

Let me say, first of all, I know that he’s left, but I think Senator 

Kerry did a masterful job of laying it out. There was a time, Senator Dorgan, when the Chairman of the Commerce Committee preceded me, he said very clearly, that the Tauzin-Dingell bill will 

never pass the House. And he was right. 

The Tauzin bill in that form did not pass the House. The House 

like the Senate takes suggestions, suggested legislation from each 

one of us and works their will, Committee process, change the bill 

mightily, the floor changed it again. 

It is a different product than the Tauzin-Dingell bill that the 

Chairman who preceded me promised would never pass the House. 

It didn’t. I don’t expect the Tauzin-Dingell bill as it came from the 

House to pass the Senate either. 

I fully expect the wisdom of the Senate and the wisdom of this 

Committee will be employed to find your own way of achieving 

what we have all described today as mutual goals, which is 

incentivizing competition and growth and development content, all 

these new systems at the same time, making sure the Bells do in 

fact open up their local markets in full and vibrant telephone competition. 

We gave our members on the House side a chance to speak and 

271 of our colleagues joined my good friend John Dingell and I in 

passing this bill to you for your consideration. And the debate in 

the House was focused, was extremely focused on a simple question. What’s the best way to foster the rapid ubiquitous deployment 

of broadband networks and services and ensure that we have a vibrant, competitive marketplace where the winners and losers 

would be picked by the consumers of America, not by you and I; 

exactly as Senator Kerry said. 

It required members to make a single determination, whether 

they define competitive marketplace based upon facility-based competitors, competing against each other using their own infrastructure and their own different systems, and technologies. Or was 

competition to be defined as multiple competitors piggybacking on 

the Bells’ network and the facilities at below cost rates. 

And I am going to quote an interesting gentleman to define the 

terms of that debate. Senator Breaux, you put your finger on it 

very accurately. 

The Chairman, I’m going to quote the Chairman of AT&T, Chairman Michael Armstrong. He said, this is a quote, ‘‘No company will 

invest billions of dollars to become a facility-based broadband services provider if competitors who have not invested a penny of capital nor taken an ounce of risk can come along and get a free ride 

on the investments and the risk of others.’’

19

That, Mr. Chairman and Members, is what the House debate 

was all about. And the House made it clear, if you are willing to 

take the risk and spend the capital necessary to make broadband 

services available to consumers in America, you should not have to 

let your competitors get a free ride on your investment at below 

cost rates as you said, Mr. Breaux. 

That’s the crux of H.R. 1542. It is to give everybody the opportunity to take the risk, invest in broadband. And everybody has 

that opportunity to then reap the rewards of doing so as they build 

new content and new services for the American public, again as 

broadly defined as Senator Kerry did, not just voice and video and 

pictures and pretty HDTV signals and movies, but long distance 

medicine, learning, and all the massive amounts of new forms of 

competitive advantage our country’s companies can have in the 

world if we build these efficient broadband networks for the companies and employees to continue the growth of the American economy. 

We are told if our bill passed, by one study at one point, two million new jobs flows from it. As we begin to expand rapidly the 

growth of these new inventions and the new products that would 

come, if in fact we do this. 

Let me add that H.R. 1542 has a stick as well as a carrot. And 

Mr. Chairman, I hope you give this real thought as you consider 

what you might do in the Senate side. H.R. 1542 requires that the 

Bell companies provide broadband to all their subscribers within 5 

years, a build-out to 100 percent of the country in 5 years. 

No other company or group of companies has had such an unprecedented obligation imposed upon them. But this bill imposes it. 

We have all heard and seen on TV what the opponents say about 

the bill. They say that if they can’t use the Bells’ broadband facility 

under current regulatory framework, they’ll go out of business and 

the Bells will have a monopoly on broadband. That, Mr. Chairman, 

is simply not true. 

I cannot say it stronger. It is not true. The cable industry controls today about 70 percent of the broadband market. If we risk 

any group of companies gaining a monopoly from broadband, it’s 

the cable companies. 

They are unregulated. And they have currently got the dominant 

position in the marketplace. If we do not deregulate the telephone 

companies and give them a chance to compete against the cable 

companies, we risk having to come back here one day, in a couple 

of years, and to reregulate broadband services offered by the cable 

companies. 

You and I don’t want to have to do that. There is nothing in the 

law or in this bill, Ms. Boxer, that prevents the cable companies 

from reaching out to that 45 percent of California and offering competition to the DSL service. It could be provided by the Bells in 

even greater measure if this bill passes. 

This is about having wire competition as well as hopefully 

nonwire and satellite and other forms of competition. 

Second, H.R. 1542 does not prevent the Bells’ competitors from 

using the legacy parts of the Bells’ network. I think it was Senator 

Inouye who talked about the concern that, Fitzgerald rather, talked 

about that nothing in our bill should put some new goal post up, 

20

take away the rights of the CLECs who are currently using the legacy systems. 

Nothing in our bill does that. The bill continues the ability of the 

CLECs to completely use the legacy systems under rules and regulations covered and set by the Commission. 

Furthermore, we added a Buyer-Towns Amendment to the bill on 

the floor after tricky polymetric attempts to keep us from offering 

it. That provision imposes upon the Bells the obligation to allow its 

new broadband facilities, its new wires, its new remote term lists, 

its new de-slams, allow all those facilities to be used by the competitor CLECs at rates, terms and conditions set by the Commission, 

not by the Bells. 

So it not only preserves the CLEC’s current rights to use the 

Bells’ wired legacy system, it gives them the rights under terms, 

conditions set by the Commission and prices set by the Commission 

to use the new facilities built by the Bells. 

Don’t let anybody tell you we moved the goal post back. It just 

isn’t true. 

Competitors have also argued that they will go out of business 

because after the deregulation provided in H.R. 1542, there are no 

rules left to enforce. Well, there are plenty of rules left to enforce. 

H.R. 1542 does not change any of the rules for basic telephone 

service. None. Furthermore, in an amendment offered by Mr. 

Upton, Mr. Chairman, it’s a big important amendment. It provides 

the hammer that the Commission asked us here in Congress to 

give them. 

It increases the penalties on nonperformance of the Bells in offering competitors rights to use the systems in Montana, Senator, by 

10 times. It doubles those penalties if they are repeat offenders to 

20 times. And it gives the Commission something it doesn’t have 

today, cease and desist enforcement authority to force the Bells in 

your community to treat the CLECs right and open up the local 

markets. That is all new in this bill added to the House floor. 

Well, we finally heard that because only 10 percent or 11 percent 

of Americans subscribe to broadband, we really just face a demand 

question. That’s a question, Senator Allen, I think you talked 

about. 

Remember Pet Milk, Senator, in Louisiana? I know John has 

heard of it. Louisiana people thought Pet Milk was the name of 

canned milk, because it was the only form of canned milk offered 

in the stores in my state in the country or where I grew up along 

the bayous. 

We didn’t learn until much later there were other forms of 

canned milk. And the reason we didn’t know there were other 

forms of canned milk, because when you have got one store in 

town, they sell one product. You don’t get that enriched content. 

You don’t get the other forms of products and services when there 

is only one store in town. 

You know what you get when you’ve got one store in town. You 

get bad prices, bad terms, bad products, bad attitudes. When you 

get more stores in town, you know what you get? You get different 

forms of canned milk. 

21

And you learn that Carnation makes a canned milk, not just Pet. 

And you learn those. You learn about new products. More importantly, you get a variety of new content in those stores. 

And companies begin competing for shelf space and they treat 

you better and prices go down. Look at the wireless telephone marketplace. When we deregulated it, we compete and created competition, competitive services, the rates plummeted, giving phones 

away just so you use their service today. The same thing can happen in broadband if we are smart enough to deploy more, not less 

of the pipes that are needed to create that rich content, Senator 

Allen, you and I want to see happen in this country. 

Finally, let me say, Mr. Chairman, we have two options. We gave 

the House two options. We can either as Senator Breaux said create a level playing field for these new participants in these 

broadband services. We can do it one of two ways. 

We can either say to the telephone companies, we are going to 

deregulate you and let you compete against cable companies so all 

of America has a chance to get service and products in more than 

one store on the ground, or we are going to have to come back here 

and regulate the cable companies, so that the cable and telephone 

companies are similarly treated in this country. 

Now, I choose the former. And the House chose the former by 

overwhelming number. It is better to have a competitive marketplace where consumers regulate that market by picking the winners and losers and choosing the best services and forcing them to 

compete. That is the choice the House made. 

Now, look, you guys are bright. You ladies are bright here, just 

like the House members are bright. We don’t have a human monopoly on the wisdom of these two bodies. 

If we haven’t done it the way you want to do it, find a different 

way. Find a better way. But in the end, let’s create that level playing field, John. Let’s make sure that all Americans have more than 

one store to shop in for these vital services. 

And let’s make them fight so hard for our business that they create all that rich content, all those new forms of Pet Milk, and they 

give us all kinds of varieties and quality of services that this country deserves, not just in pretty pictures but all those things Senator 

Kerry described. 

That is what this fight is about. Mr. Dingell and I are tenacious 

indeed. Because we really believe, as I know all you do, that these 

kinds of services are critical to America. They have been bottled up 

too long. 

It’s time for us to open up that bottle and let the genie out. And 

that is what our bill tries to do. If you have got a better way to 

do it, sir, I am anxious to hear it and anxious to work on it. 

[The prepared statement of Mr. Tauzin follows:]

PREPARED STATEMENT OF HON. W.J. ‘‘BILLY’’ TAUZIN,

U.S. REPRESENTATIVE FROM LOUISIANA

Chairman Hollings, Senator McCain, and other distinguished Members of this 

Committee, thank you for the opportunity to appear before you today to discuss with 

you H.R. 1542, the Internet Freedom and Broadband Deployment Act. I appreciate 

your willingness to permit my good friend John Dingell and I to explain this very 

important bill to you, and to inform you of the key changes made to the bill on the 

House floor. 

22

Three weeks ago today, 271 of our colleagues joined John Dingell and I in voting 

to pass H.R. 1542. It was a hard-fought, well-advertised battle to determine the future of our national broadband policy framework. 

Two hundred and seventy-three Members of Congress voted to keep the Internet 

free from onerous, burdensome regulations. Two hundred and seventy-three Members voted to keep the Internet out of the hands of meddling state bureaucrats. Two 

hundred and seventy-three Members voted to change how broadband services are 

regulated, and against the status quo. Two hundred and seventy-three Members 

voted against applying legacy telephone rules to broadband infrastructure. 

The debate in the House was focused on a fundamental question: What is the best 

way to foster the rapid and ubiquitous deployment of broadband networks and services, and ensure that we have a vibrant, competitive broadband market? 

The debate in the House required Members to determine how they define a competitive broadband market. Was it to be defined as facilities-based companies competing against each other using their own infrastructure and often different technologies? Or was competition to be defined as multiple companies piggy-backing on 

the Bells’ network and facilities at below-cost rates? 

Well, Mr. Chairman, the House decisively stated that real broadband competition 

is facilities-based broadband competition. The House declared that every company, 

not just newcomers, not just companies using certain technologies, should be given 

the same incentive to invest in broadband infrastructure. That incentive was 

summed up best by AT&T—yes AT&T—Chairman Michael Armstrong. He said that 

‘‘no company will invest billions of dollars to become a facilities-based broadband 

services provider if competitors who have not invested a penny of capital, nor taken 

an ounce of risk, can come along and get a free ride on the investments and risks 

of others.’’

That, Mr. Chairman, is what the House debate was about. And the House made 

it clear: ‘‘If you are willing to take the risk and spend the capital necessary to make 

broadband services available to consumers, you should not have to let your competitors get a free ride on your investment.’’ That is the crux of H.R. 1542—everyone 

has the opportunity to take the risk necessary to invest in broadband and everyone 

has the opportunity to reap the rewards. And that is why this bill will lead to widespread broadband investment and innovation. 

Let me add that H.R. 1542 has a stick as well as a carrot. H.R. 1542 requires 

the Bell companies to provide broadband to all of their subscribers within 5 years—

a buildout to 100 percent of the country. No other company or group of companies 

has had such an unprecedented obligation imposed upon them. 

We have all heard, or seen on TV, what opponents say about H.R. 1542: They say 

if they can’t use the Bells’ broadband facilities under the current regulatory framework, they will go out of business and the Bells will have a monopoly on broadband 

customers.’’ That, Mr. Chairman is simply not true. 

First, the cable industry controls 70 percent of the broadband market today. If we 

risk any group of companies gaining a monopoly over broadband, it is the cable companies, not the Bells. If we do not deregulate the telephone companies, we risk having to come back here in a couple of years to re-regulate the broadband services offered by the cable companies. 

Second, H.R. 1542 does not prevent the Bells’ competitors from using the legacy 

parts of the Bells’ networks to offer broadband services. Nothing in the bill prevents 

this. And the legacy parts of the Bells’ networks provide the platform upon which 

competitors can build their facilities and provide broadband services. 

In addition, with the passage of the Buyer-Towns Amendment on the House floor, 

H.R. 1542 now goes even further in providing competitors with access to the Bells’ 

facilities than John Dingell and I had originally envisioned. The Buyer-Towns 

Amendment ensures that competitors get access to the ‘‘last-mile’’ fiber facilities deployed by the Bell companies at FCC-regulated rates, terms, and conditions for the 

provision of broadband services. So, under the Buyer-Towns Amendment, the competitors don’t have to build any ‘‘last-mile’’ facilities, even fiber, and the FCC still 

decides what the appropriate cost of using the Bells’ facilities will be. 

Competitors have also argued that they will go out of business because, after the 

deregulation provided in H.R. 1542, there will be no rules left to enforce. Well, there 

are plenty of rules left to enforce because H.R. 1542 does not change any rules for 

basic telephone services and any rules for using the legacy parts of the Bells’ networks to provide broadband services. Furthermore, an amendment offered by Fred 

Upton will actually increase the FCC’s ability to enforce those rules. The amendment increases the FCC’s enforcement authority by tenfold, giving Michael Powell 

the ability to punish violators of the Communications Act. 

We have also heard the assertion that, because only 10 percent of Americans subscribe to broadband, we are really just faced with a demand problem, not a supply 

23

problem. We have heard that cable companies offering broadband pass 70 percent 

of the nation’s homes, and that the only reason that more people are not subscribing 

is because there are no ‘‘killer apps.’’ Well, there are no ‘‘killer apps’’ because, among 

other reasons, content providers are not going to bother to spend the money to create ‘‘killer apps’’ until there are enough broadband pipes in the United States to 

carry bandwidth-heavy content. When content providers look at the United States, 

they see, at best, ONE broadband provider in most communities. That’s not the vibrant, competitive broadband market that will spur content providers to invest in 

broadband content—or that will spur consumer demand. 

Content is critical, and we need to do everything possible to ensure that high 

-bandwidth content is developed. But high-bandwidth content will not be developed 

if there is not an adequate supply of pipes to deliver it. 

And having the opportunity to obtain broadband service from one company is not 

going to be attractive to most people. Everybody knows that, when you have one 

grocery store in town, you get higher prices, poorer service, and fewer choices of 

products. But when you have two, three, or more stores in town, you get lower 

prices, better service, and more choices. Broadband is still not being offered at a 

price at which most consumers can afford the service. It is not until we have facilities-based broadband competition that prices will be lowered significantly. 

Mr. Chairman, we have two options. We can deregulate all broadband services 

and maximize all carriers’ incentives to deploy broadband networks as rapidly and 

ubiquitously as possible. This will give the cable companies the competition they 

need to keep their dominance of the U.S. broadband market in check. Only when 

cable companies face real, unshackled competitors will they seek to serve all Americans at the lowest possible price. All Americans will benefit from the race to speed 

broadband deployment at affordable rates. 

The other option is to re-regulate the cable companies. 

H.R. 1542 chooses the first option. The legislation will stimulate real, vibrant 

competition. Americans will have a choice among broadband providers and have access to the many exciting applications that can only be available through widespread high-speed Internet connections. 

Mr. Chairman, we can keep the Internet free from unnecessary and burdensome 

regulations and let it thrive, or we can stifle the growth of broadband by keeping 

it saddled with rules designed for telephone services. The House has chosen to keep 

the Internet free, and I hope that the Senate will recognize the efficacy of that decision. 

Mr. Chairman, thank you again for providing me with the opportunity to appear 

before your panel today on what is a vital matter for the future of our digital economy. I would be happy to answer any questions that Members of the Committee 

may have.

The CHAIRMAN. Mr. Dingell. 

STATEMENT BY HON. JOHN D. DINGELL,

U.S. REPRESENTATIVE FROM MICHIGAN 

Mr. DINGELL. Mr. Chairman, thank you. Members of the Committee, thank you. Mr. Tauzin and I are delighted to appear here 

this morning to testify about H.R. 1542, The Internet Freedom and 

Broadband Deployment Act. 

I want to endorse what my friend and Chairman Tauzin has had 

to say to you this morning, and say I agree with him thoroughly 

and I make to you the same offer. I would ask unanimous consent 

that my full statement be inserted in the record and be permitted 

to make just a few comments on these matters. 

The CHAIRMAN. It will be included and so will Mr. Tauzin’s. 

Senator DINGELL. Mr. Chairman, we are here to talk not about 

a vast squabble in the industry. We are here to try and see how 

we best serve the interests of the country and the interests of the 

American consumer public. That is what this is all about. 

As Mr. Tauzin has mentioned, you have your choice of two ways 

of doing it. One, regulate everybody or, two, to allow everybody to 

compete. 

24

And I’ve heard a lot of discussion about H.R. 1542 this morning, 

some of it, and it reminds me of an event that I participated in way 

back when I was a young lawyer and as a law clerk of a federal 

judge. 

There was a collision in the Detroit River which occurred between three lake vessels, freighters, if you please, all of them with 

radar going, all of them going in the fog. And when the judge 

heard—had heard the testimony and rendered his decision, he said 

he couldn’t understand how this accident could have happened. Because in fact according to the testimony, none of the vessels was 

within three-quarters of a mile of point of impact. 

What I’ve listened to and heard the debate on this legislation is 

that I think it would do a lot of the people who are talking about 

it good to look to see what the House has done. 

Now, I want to endorse very clearly the statement of Mr. Tauzin. 

We, if you can do better than we did, we challenge you to do it. 

We urge you to do it and we hope that you succeed. 

I will tell you also that if you attempt that and you succeed, we 

want to sit down and talk to you about seeing whether we can both 

work together to come up with something better than that which 

we have done today. Because obviously in human entities like this 

Committee and our Committee, there is room for working together 

and for trying to come up with something that is going to be better 

from the standpoint of all. 

There really are just two areas where we go in and we deregulate. We deregulate the last mile and we deregulate the backbone. 

In the area of the backbone, that is the area where there is substantial problem in terms of getting the speed up. 

In the last mile, you will find that there really are only about 

two people who can—or two entities that can reliably get in there 

to provide service. 

One is the long line people who are exempt from regulation and 

can enter this without any hinderance. The other are of course the 

cable people. Now, all of you will remember we had to pass legislation to deregulate cable because of high-handed and arrogant behavior. 

I am hopeful that that will not be an exercise that I will engage 

in at any time in the future. But I would point out that if you want 

to get service to the people, H.R. 1542 will get it there for 

broadband. And it will do it by allowing everybody to fairly compete. 

You are going to hear a lot of complaints from the CLECs who 

are going to say, Oh, isn’t this terrible. And you are going to hear 

that all of the CLECs are opposed. 

In point of fact, not all of the CLECs are opposed. Some of them 

strongly support the legislation. And some of them support it very 

strongly because they recognize that there are significant other 

benefits to them in so doing. 

I would note one thing that is of importance. The CLECs who are 

opposed are those who are now getting service from the Bells at reduced costs. 

Interestingly enough, the question before us here is are we going 

to see to it that everybody has a chance to compete. And as Mr. 

Tauzin mentioned, the Chairman of AT&T came out and made this 

25

point: ‘‘No country is going to invest billions of dollars to become 

a facilities-based broadband service provider if competitors who 

have not invested a penny of capital, nor taken one ounce of risk, 

can come along and get a free ride on the investments and the 

risks of others.’’

What we are suggesting here then is that we have protected the 

rights of the CLECs. Those who are getting a free ride today will 

continue to get a free ride on the things on which they are getting 

a free ride. That is not changed. And we will give them other special preferences. We will enable them to get services from the Bells 

at regulated prices regulated by the FCC. Fair price. 

We have done something more. We were aware of the concerns 

of everybody about the many regions of this country today that 

don’t have broadband service. My question to you is do you want 

to let the people who have not provided broadband services to those 

areas and who have not provided competition in other areas to continue to enjoy the wonderful situation which they now enjoy or do 

you want to do something about it. 

First of all, our bill mandates that under substantially, as mentioned, substantially increased penalties that the Bells, if they get 

into this and if this legislation passes, to provide service to every 

part of the country within 5 years. 

You don’t do something like that, Members of the Committee, 

you are not going to see any services going to the rural areas that 

you and Senator Burns were talking about. It is just not going to 

buildup. You can sit back and say, well, we should have done it in 

5 years. But that service is not going to be there. 

We want to see that you get your constituent service. I’ve got 

rural constituents who won’t get service under this and I want to 

see them have it. I also want to see them have an option to have 

service provided by many so that we get competition, so we get 

faster service, better service, service at fair, competitive prices. 

This Committee and our Committee in times past made the judgment we were going to move from the kind of regulated service to 

a new kind of unregulated service to afford better considerations. 

Now, you are going to hear a lot of complaints about, well, the 

Bells are not going to open their local nets. The simple fact of the 

matter is the Bells are going to remain under the same kind of 

strictures on which they now suffer, in the future. 

We do not change that with regard to voice. What we change is 

we open it with regard to broadband. We force competition into two 

areas, backbone and the last mile. 

And in so doing, we afford opportunities for everybody who is not 

there, and we do so in addition by requiring that the Bells proceed 

to provide service to every part of this country by the end of 5 

years. And we put sanctions and penalties and painful provisions 

for them into the legislation if they do not do so. 

Now, I just want to conclude by repeating this. We challenge you 

to do better than we did. We challenge you to have a proceeding 

here. 

Here are the people who are involved. I would ask, however, that 

you read the bill. You look to see what it is we have done. 

There are a lot of high-priced lobbyists in this town that make 

a fine living running around lying about what the House bill does 

26

and what we did. And I do not have any objection to them making 

a fine living, but I do think, gentlemen, that you have the capacity 

to gather the truth by looking at the legislation and by conducting 

a fair and an open hearing of the kind that you have begun. 

And I want to commend you for that, Mr. Chairman. And I want 

to suggest that proceeding down this course and meeting us in an 

honest conference to discuss the real differences will result in a 

better piece of legislation than we have done and an opportunity 

for us to all serve the public interest. Mr. Tauzin and I have been 

working on this business in telecommunications for a long time. I 

introduced the first legislation, and it got pounded and changed beyond any recognition by me. 

And the following year we found it changed even a little bit 

more, not a lot but a little. And it is better legislation because of 

the process. 

And the Senate and the House sat down in this room, as many 

of you will remember, to discuss the differences between the two 

bills and to come up with something which has the capacity to 

serve the country better. 

I would note that there is a lot of complaint about monopoly. 

Well, if you want to look at monopolies, take a hard look at the 

cable folks. They’ve got about 70 percent. If you want to take another look at monopolies, take a hard look at the local Bells. But 

also take a look at the long line folks, their monopolies. 

And the whining I’ve heard from them is very interesting. Because all they are telling me is we just want to continue suffering 

along with a fair advantage over all of our competitors. And I 

don’t—somehow or other I think that is inconsistent with the purposes of my friends on this Committee. 

In any event, Mr. Chairman, and Members of the Committee, we 

have a chance to write a good bill. I hope we can. I am satisfied 

from my knowledge of all of you up there that is what you want. 

I would say one thing to my old friend, Mr. Dorgan. I don’t remember ever hearing any member of the House talk about how we 

are going to give a lesson to the Senate. I would say in all honesty, 

that is beyond my capacity. 

But I would observe to you that we would be very happy to sit 

down and discuss with you a meaningful piece of legislation and 

one that we can all be proud of instead of listening to a lot of highpaid, fat cat lobbyists who are pushing a situation that does not 

benefit the United States. 

Let’s let the passengers get out of there and do a little bit of honest competition and see if we are not all a little better for it. Thank 

you, Mr. Chairman. 

[The prepared statement of Mr. Dingell follows:]

PREPARED STATEMENT OF HON. JOHN D. DINGELL,

U.S. REPRESENTATIVE FROM MICHIGAN

Good morning, Chairman Hollings, Senator McCain, and Members of the Committee. Thank you for inviting us to testify about H.R. 1542, the ‘‘Internet Freedom 

and Broadband Deployment Act.’’ As you know, the bill recently passed the House 

with both a majority of Democrats and Republicans voting for it. 

When my friend, Chairman Tauzin and I first introduced this bill back in 1999, 

the notion of ‘‘broadband’’ was little known and even less understood. Much has 

changed since then. High speed Internet connections are now believed to be crucial 

27

in getting high technology companies back on their feet, creating over a million new 

high paying jobs for American workers, and paving the way for more robust content 

to make its way to the Information Superhighway. 

The debate is no longer whether broadband connections are needed, but how best 

to get it done. This is a huge step forward. And we even have new terms that have 

recently entered the lexicon of this debate. Some argue that the so-called ‘‘supplypush’’ approach is the best way to spur broadband deployment; others say that the 

‘‘demand-pull’’ approach is the better solution. 

The supply-push proponents say that more facilities need to be constructed, and 

that will happen only with greater investment incentives and less regulation of the 

broadband industry. These concepts are, of course, at the core of the Tauzin-Dingell 

bill. 

The demand-pull advocates argue that the way to stimulate broadband is to give 

greater intellectual property protections to content owners so that more high value 

content will be available on the Web. When that happens, they say, more people 

will subscribe to high speed Internet service, and the resulting demand stimulus 

will spur deployment. 

In my judgment, both groups are right; they are two sides of the same coin. I 

would observe that this is not a chicken or the egg question where one thing will 

necessarily drive the other; the two approaches are inextricably linked. 

Focusing solely on content protections won’t do the job because the current state 

of technology will not allow the richest applications to traverse the net. The pipes 

simply aren’t fat enough. And, if left only to the cable companies, they may never 

be. Head-to-head competition between facilities providers, both cable and telephone, 

is critical. We must foster an environment where innovation and investment will 

constantly drive Internet speeds faster and faster. And without effective competition, cable companies not only will have little incentive to innovate, but they actually have a disincentive to do so. Because as Internet speeds increase, cable 

broadband service will begin to steal revenues from their traditional cable television 

business. 

That is why H.R. 1542 must be a critical component of any national broadband 

policy. The bill will create regulatory parity between cable and telephone companies 

so that each will have similar incentives to innovate and invest. The Rush-Sawyer 

amendment will require telephone companies to build-out broadband service to 100 

percent of their serving areas within 5 years. That provision alone is the most important step Congress has taken to close the digital divide since the inception of the 

Internet. And it will mandate that telephone companies provide ‘‘open access’’ to unaffiliated Internet Service Providers, or ‘‘ISPs’’, like AOL, Mindspring or Earthlink. 

That will give consumers the freedom to choose their favorite ISP, something they 

currently do not enjoy when they subscribe to broadband service from most cable 

companies. 

The current regulatory scheme for broadband Internet service is in disarray. The 

FCC is partly to blame, but so are we. When Congress wrote the 1996 Act, we established a panoply of rules designed to open the Bell companies’ monopoly local phone 

networks to competition. And that was the right thing to do. What we didn’t contemplate was that at some point in the future these same rules would be applied 

to brand new, advanced services for which no monopoly exists. 

Similarly, in the 1996 Act, Congress deregulated cable companies. Not just for the 

cable television services that constituted their main business at the time, but for 

anything and everything they might offer in the future. In my view, this approach 

to regulation was a mistake: Congress imposed a regulatory scheme based not on 

the type of service provided, but on the type of company providing it. 

Now we find ourselves in the awkward situation of having telephone and cable 

companies offering virtually identical services—high speed Internet—but under very 

different sets of rules. It is simply bad telecommunications policy—it results in significant economic distortions and, just as important, it deprives the public of the 

enormous benefits that normally come from fair and fierce competition between 

firms offering similar services to consumers. 

Mr. Chairman, I congratulate you for holding this hearing today. It is a first step 

toward creating a fair and rational broadband policy, which is so important for the 

health of the economy and the public good. I hope and believe we can strike the 

right balance quickly and with minimal discord if we work together toward this 

common goal. 

I look forward to answering any questions the Committee may have.

The CHAIRMAN. Thank you. They both commented about a balanced approach. Let the record show that that is what this hearing 

28

intended in the original instance. We had, as you know, Mr. Marquis, so we would have a balanced approach. 

But Mr. Tauzin said he’d rather prepare just without him. And 

then when we had the local public service commissions comment, 

because we had a panel after you two, again Mr. Tauzin said that 

they would be sandbagging and ambushing him, and even the title, 

I’ve got a letter to make that part of the record that we were trying 

to ambush—you are all uptight. 

Chairman Tauzin, you remind me a lot of Michael Armstrong. 

You both have been quoting him. And I do not know when he made 

that statement, but of course, and a lie, that is a bunch of baloney 

in the sense that we heard that when you two voted and supported 

the 1996 Act. 

We had quite a debate. And we said, you know, Judge Green was 

pretty smart. He opened up the long distance market for access 

where they would pay not only the cost but a reasonable profit. 

If you both look at page 97 of the 1996 Act, you will see that is 

exactly what we did with respect to our deregulation. We said in 

Section 252 on Page 97, sell at cost plus a reasonable profit. 

Now we noticed and we had the experience of long distance. And 

boy, they have had a viable competition. And not only—not an advantage or unfair advantage or whatever else that the gentlemen 

refers to; on the contrary, they are on the ropes financially. 

You talk about taking a risk. There is no risk to the crowd I refer 

to, namely the Bell companies. There is a risk, yes, the cable companies are private investors, not government-instituted monopoly, 

but on the contrary, there are 1,080 cable companies. 

And let me go right on into the services that they have to provide 

and what have you, their regulations, but more particularly to 

what they have, Chairman Tauzin. You and I agree, let us see if 

we can make 2 apples and 2 apples equal 4 apples. There are 85 

percent that now have access to broadband. You disagree. 

Mr. TAUZIN. Absolutely. 

The CHAIRMAN. Why do you disagree? 

Mr. TAUZIN. Because what the cable companies are saying is that 

they pass 85 percent of American homes. You have got to understand that if you are going to deliver broadband service——

The CHAIRMAN. I am talking about cable companies and, you 

know, the telephone companies and the Bell companies. The Bell 

companies are in there like gangbusters right now. 

Mr. TAUZIN. No. I disagree with that and we have got the numbers to show it. The marketplace right now is about 89 percent vacant of the services. Let me ask you a question. 

The CHAIRMAN. Yes, I’d like you to answer that question. Where 

do you find less than 85 percent? 

Mr. TAUZIN. The problem is that the numbers you hear cited do 

not take into account that for the cable companies to provide true 

broadband services, high-speed broadband services, they have to go 

in on those systems and add an extensive amount of investment. 

It’s called nodes. 

As more and more people sign up to a broadband cable—I am on 

broadband cable in Northern Virginia—as more of my neighbors 

sign up, the cable company has to come in and make substantially 

29

new investments because the speed goes down as more cable subscribers sign on. 

And unless the cable companies come in and put new nodes in 

to build the speed back up, those systems are incapable of serving 

the 85 percent of the people that are passed by these wires. 

The Bell companies likewise have to make significant investments in new remote terminals, new fiber systems in order to 

make their lines accessible for really high-speed services, as Mr. 

Kerry described them. 

So, you know, their lies and statistics, I am afraid we are dealing 

with some interesting statistics here. The truth is——

The CHAIRMAN. Well, what statistic do you have? It passes 85 

percent of the homes. 

Mr. TAUZIN. These are the facts. 

The CHAIRMAN. I cannot read that stuff. My eyes are not that 

good. 

[Laughter.] 

The CHAIRMAN. But do not worry about that. I mean, you can 

make these pretty little charts. We can play that game over here 

too. You deny that 85 percent broadband passes homes right now. 

Mr. TAUZIN. Yes, I deny that. 

The CHAIRMAN. Well, what percent do you say, excuse me, what 

percent—do not give me all of that——

Mr. TAUZIN. I don’t know. But it’s a lot less than 85 percent. 

The CHAIRMAN. Well, what is your percent, Mr. Dingell? 

Mr. DINGELL. Well, I do not have any percent. All I’ll tell you is 

you are right. It goes by——

The CHAIRMAN. That is right. Now, I knew I would get some help 

from John. 

Mr. DINGELL. The problem——

The CHAIRMAN. That’s right. It goes by. And you are right, Mr. 

Dingell and it only goes to the home——

Mr. DINGELL. The problem is they go right by. They don’t stop. 

The CHAIRMAN. That is right. And they do not stop on account 

of demand. And they do not stop because they cannot dig up the 

streets. 

Mr. DINGELL. No, they don’t stop——

The CHAIRMAN. Wait a minute——

Mr. DINGELL. They don’t stop because the investment has not 

been made. 

The CHAIRMAN. That is right. You and I agree. The investment 

has not been made because they cannot dig up and go to those 

businesses. 

So the cable we are talking about is predominantly just residential. It does not even go to the business. You and I are right. They 

cannot make the investment. 

But let us see who can make the investment now. We have got 

85 percent and only 10 percent have it. I am just quoting you, you 

just used that figure. So that is 10 percent of the 85 percent and 

restricted to residential. So 90 percent of the market is out there 

still for competition. 

I mean, you act like the cable has taken it all. They have 10 percent of—they only passed 70 percent, 10 percent of 70 percent of 

residences alone and not businesses. 

30

Mr. TAUZIN. Senator, let me, if I can, let me first address your 

opening comments. You are the only person I know in this town 

who has ever called me tight. And I want to tell you, I am as loose 

a guy as you ever found here. John Breaux and I come from a loose 

kind of culture. So I don’t buy that argument. 

[Laughter.] 

Mr. TAUZIN. Second, we come here as open and as willing to 

work with you in any kind of new proposals and ideas you have. 

What I suggested to you in organizing this hearing when you called 

me to come, was that I had been invited to lunch many times but 

I didn’t intend to come to be the meal. I wanted a fair chance to 

tell you what we did, and if you want to have those other folks 

around in 20,000 hearings, I invite you to do that. But, so I just 

want to put that on the record. 

The CHAIRMAN. That’s right. You had those five hearings and six 

mark-ups, and I guess we will have to do that again. Do not come 

around here in September and claim I am delaying this. 

Mr. TAUZIN. OK. 

The CHAIRMAN. Thank you. 

Mr. TAUZIN. The point is, we will come back if you need us again. 

Let me try to say it again as clearly as I can. The numbers that 

the Commission and cable companies put out to us about homes 

passed do not take into account that even if the cable is broadband 

adequate today, that it cannot serve this vast amount of Americans 

they passed without substantial new investments. 

They will tell you that. They have to go build all kinds of new 

investments if in fact demand increases on the systems. Because 

every new customer lowers the speed until new nodes are put in. 

Second, what we did, Senator, in this bill was simply say that 

these old lotto lines, these old lines that prevented the Bell companies from doing what the cable companies can do today to reach out 

across these lines the judge drew on the map long before the 1996 

Act, that they can reach out and extend their broadband systems 

across those lines. 

And as John said, make the investments in that last mile. And 

we’ve added the provision that even when they do that, Senator, 

they have to make those facilities available at rates set by the 

Commission for the competitors. 

That’s a fair way of doing it. Again, if you have got a fairer way, 

please tell us what it is. 

The CHAIRMAN. Well, a better way is told by just people that you 

represent ought to take it over, those that do not have a risk. Let 

me just state exactly what they are doing. 

Verizon spent nearly 18 billion last year and they increased the 

number of DSL customers by 666,000 to 1.2 million. SBC invested 

billions in heavily promoted Project Pronto. They got 146,000 more. 

And Bell South has put in 33 billion—I have got way more but 

I am cutting it short because my time is limited—33 billion during 

the 1990s. And they are going like gangbusters. 

And let me quote Duane Ackerman right there in my own backyard and I want Ms. English to listen to this. ‘‘Some companies 

have suggested that before DSL can be deployed, substantial investments need to be made in the network. I think the good news 

is for Bell South a large part of that investment has in fact already 

31

been made. You will see Bell South continue to drive investment 

into DSL on a per customer basis. And the reason is simple. DSL 

is growing and DSL is profitable.’’

You have got 85 percent already passing the homes. We will all 

agree on that. And they are fighting over the 15 percent, and then 

DSL has gotten all the business. And they will put the CLECs out 

and take the market power and take over the poor little cable that 

is trying to give competition we did not have. 

I described the Bell companies for 3 years after they said they 

were going to go into long distance in a year’s time. For 3 years 

they kept us in coats. They did absolutely nothing. They are still 

only in 40 states in long distance, four-fifths of the country. 

If you worry about broadband, four-fifths of the country does not 

have that kind of competition. That is the big problem before this 

Committee right now. 

My time is limited. Let me yield to Senator McCain, or Senator 

Burns. 

Mr. DINGELL. Before you do, would you permit me to make an 

observation? 

The CHAIRMAN. Please do. 

Mr. DINGELL. I applaud your remarks. I thank you. The simple 

fact of the matter is we are all agreed on one thing. We want to 

get service to the people. 

These things may seem to be easy. And you may be looking at 

broadband and the lines that provide broadband as being something which can absorb any load. And the simple fact of the matter 

is that they aren’t. 

As Mr. Tauzin mentioned, the more traffic you put in, the slower 

they move. It is also so that you have to have significant investment to get that 85 percent from the point where the line passes 

the house to the home of—or the business. And all of them, and 

these lines pass both homes and businesses, so that you can get the 

service into the home or the business. 

This is going to take an investment. And the question is how are 

you going to get the investment. And who are you going to get to 

make the investment. Now, Senator, you are an intelligent man. 

You are not going to sit there and tell me that a CLEC that has 

no investment in equipment is going to have either the capital or 

the resources to go in and to provide the service to that home. 

You’ve got to find somebody that has got the means to provide 

the necessary investment. And all I am going to do is quote Mr. 

Anderson, a well-known proponent of this legislation, or Mr. Armstrong rather, in saying nobody’s going to make that investment if 

they don’t have a chance of getting some return on it. 

So what we are suggesting is let the people in who can and will 

invest. Let everybody invest. CLECs can go in if they want. 

And the ones who are getting a free ride on everybody else’s back 

can still get it. They are going to get the same rights they have 

with existing services. Those are not being taken away. 

And on any new investment, they are going to get the right to 

go in and to get those services provided by the Bells on the basis 

of fair prices under regulations issued by the FCC. 

And I repeat, if you can come up with a better way of speeding 

this process up, I am for it. But do remember that you only have 

32

a small percentage of the people in this country actually receiving 

the service. Our debate this morning should be about how we are 

going to get service to the American people and how we are going 

to catch up on the Japanese and Koreans and others. 

Now, let me just mention this to you. The homes that you say 

are having these wires passed, are having the wires pass them. But 

the thing you’ve got to know is we want to have—we want to have 

more than one who will go into that home. 

We want to see that we make it a wise and intelligent business 

judgment by the people who are making the investment that they 

ought to go in so we have competition, not that the American consumer is saddled with a situation where there is only one person. 

He is not benefited by that situation. He just remains a victim 

if that kind of situation is obtained. 

The CHAIRMAN. And that, as you and I both agree, there is no 

broadband problem. It passes 85 percent of the homes right now. 

And I have just pointed out how the Bell Companies are in there 

like gangbusters because——

Mr. DINGELL. Senator, you are absolutely wrong. 

The CHAIRMAN. Wait a minute. Can I please make a statement 

too, that by gosh, as Mr. Duane Ackerman says, DSL is profitable. 

So they are getting out there like gangbusters. 

Now, on services the big problem this Committee has is just a 

concern expressed by our fearless leader Chairman Tauzin who 

says consumers must have the benefits of competition and not the 

penalties of monopoly unregulated service. And that’s what H.R. 

1542 gives is monopoly unregulated service. 

Mr. TAUZIN. Let me assure you, Senator, that comment is made 

about the cable companies who are unregulated and have monopoly 

of provision of services today. 

The Bell Companies are in fact deeply regulated in their provision of services. We have added new requirements on them and 

new hammers by the FCC. Again, if you have got a better way of 

making sure they open their markets, come tell us. We’ll work with 

you. 

The CHAIRMAN. Nearest thing to immortality on earth is a Bell 

Company. The poor little cable companies have got a 5-year contract down where I live and a 15-year contract here with Comcast 

in Washington. And Comcast is trying to get just a 10-year contract. 

I can tell you right now they are struggling. Mr. Armstrong, that 

you quoted, said I cannot make it and I am ready to sell it in order 

to by gosh get some kind of job done. Senator Conrad Burns. 

Senator BURNS. I am not real sure I want to jump in on this. 

[Laughter.] 

Senator BURNS. I do not think I want the football. No, I am very 

interested in making this thing work. That is Number 1. That is 

the way I am going to approach it. OK. 

But tell me, in today’s world of ones and zeroes, and we talk 

about inter-LATA relief, how do we tell that it is voice or data? 

Mr. DINGELL. The answer is you can’t. The bits that carry one 

or the other are going to carry either, and you can’t tell by looking 

at the bit if you can do that. What I want to do is just see to it 

33

that we regulate the service. You can still regulate the service 

which is what we do under H.R. 1542. 

Mr. TAUZIN. Voice service is still regulated. 

Mr. DINGELL. We don’t change the regulation of voice. That remains as it is. Data is deregulated and I think very frankly it 

should be. And everybody who has studied the question of the 

Internet says let them be deregulated. 

Senator BURNS. But if we cannot distinguish the difference between voice and data, how do we enforce it? 

Mr. DINGELL. You regulate the service. You regulate the provider 

of that service. 

Mr. TAUZIN. And the bill does that. 

Mr. DINGELL. Where he provides voice, you regulate him. And 

you do it by looking at his books. And you require him to keep 

proper books. 

You do not regulate the data transmission and you—and that is 

good. But you can identify the difference between the service. You 

do not look at the bit and say this bit is a voice bit and this bit 

is a data bit. 

You regulate the service. And you go in and you look at the guy’s 

books and you say you are doing this and we are here to regulate. 

You are doing this. This is not subject to——

Mr. TAUZIN. Let me try quickly, Senator Burns, the bill provides 

that the Bell companies under this Act cannot sell, market, nor collect any dollars for voice services. 

Second, the bill does not take away the FCC’s authority to examine under performance measures the operations of the Bell companies. And it keeps in the local PUCs and at the FCC the authority 

to regulate those voice services. 

So the agencies have the power under performance standards examination to see that the Bells in fact are enforced on the provision 

that says you can’t sell nor market nor collect a dime for voice services except under the provisions of the 1996 Act. 

Senator BURNS. Now another little question here before my time 

runs out. Would IP telephony be a data service, not subject to competitive checklist, or a voice service that is? 

Mr. DINGELL. It depends on how it is denominated by the regulatory agency and by the provider. It would be regulated as a service as opposed to being regulated as a particular stream of bits 

going across a wire. 

Senator BURNS. Well, these are the areas I have concerns about, 

and also the areas in Section 4 and I think in Section 6 just going 

through this thing. And I am sure that we can work these things 

out. I mean, I do not—maybe we cannot but I think that I am just 

going to highlight those areas of which I have great concerns and 

maybe on some other provisions of this mark. 

But I think Section 4 and Section 6 really concerns us a lot. And 

I’ve forgotten what——

Mr. TAUZIN. Senator, can I? 

Senator BURNS. Yes, go ahead. 

Mr. TAUZIN. Can I make a comment too. I know of your concern 

in Montana. 

Senator BURNS. Yeah, but we are really whizzing right along 

there that DSL, you know, one city here and one user. 

34

[Laughter.] 

Mr. TAUZIN. Let me go through some of the problems, one user 

at a time. What we have seen is that your Bell Company out there 

has in fact sold a lot of its rural areas off. 

Under the provisions of universal service laws and rules and regulations that are currently existing, when a company owns both a 

dense urban area that helps subsidize a rural area and also owns 

a rural area that is getting subsidy, the subsidies flow inside the 

company. 

When a company can sell off a rural area and another company 

can simply buy a rural area, the subsidies come from another company to them. And they tend to be able then to go ahead and with 

those resources improve those networks and deploy DSL, whereas 

the ILEC, which was subsidizing itself, had a more difficult time 

doing it. That is a fact out west. 

Second, all the universal service laws and regulations are kept 

intact. We don’t change them one iota. I know that was one of your 

concerns. Those are still intact. 

The companies that buy off a region or area, a rural area from 

an ILEC out there end up getting the benefits of that universal 

service provision. And because they don’t have to subsidize themselves, they tend to be in a better position to actually deliver the 

services. That is what’s happening out west. 

Senator BURNS. Well, I will visit with you on this and we will 

work it out. But do not fiddle with my RUS either. Understand we 

are—I got my pistol cocked on that. OK? 

Mr. DINGELL. This is the room we have to work with. We will 

be very happy to work with you on this. 

Senator BURNS. OK. But those are the areas of our most concern 

on this. And I would just like to say we are not going to close our 

mind on this thing because I think we want to get to the same 

place. There is no doubt about it. And how best we do it. 

The experience that we are having in Montana is not a very positive experience which makes us wonder about the deployment, even 

if they were given inter-LATA relief, we do not see a great rush 

to deploy DSL or VDSL. 

Mr. TAUZIN. They won’t have a choice under our bill, Senator. 

They don’t have a choice. We mandate deployment in areas where 

they are currently not going. 

Senator BURNS. Well, we thought that would happen in another 

section of the 1986 bill too, or the 1996 bill. But that did not happen, and so——

Mr. DINGELL. We are offering you a better mechanism today. If 

you can improve on it, we are willing to listen. Because I want to 

see this mandated. I’ve got some rural areas of my own. 

Senator BURNS. Well, we are going to sit down in a different 

venue and environment and try to work this out. We guarantee you 

that. 

The CHAIRMAN. Senator Brownback. 

Senator BROWNBACK. Thank you, Mr. Chairman. Again, thank 

you for holding the hearing. You did not have to do this and I appreciate you doing it. 

If I could, what I hear people talking about, and I think you both 

have done an excellent job in putting forward the case, and the 

35

Chairman has put forward his case well, is that we have—and I 

think Senator Kerry outlined it pretty well with this too, is how we 

balance our commitment to the Telecommunications Act, competition and telephony, and yet open up competition in this other area 

when we have got two different spheres of competing influence. 

You have got phone companies competing over here, and you 

have got a phone company and cable and others competing over 

here. 

Mr. Chairman, if I might submit, I wonder if there would be a 

way for us in crafting a piece of legislation that would strengthen 

the telephony competition section, which I believe that you believe 

you have done in your bill anyway. You think you have given real 

teeth now in a telephony competition section in your bill, so you 

are open to doing that. 

Mr. TAUZIN. Yes. 

Senator BROWNBACK. No problem with strengthening that, which 

has been a lot of the difficulty that you, Mr. Chairman, have had 

with this bill, that Senator McCain, Senator Burns, Senator Dorgan, a lot of people around have had with this, whether we could 

not craft this for you, really strengthen and put teeth and try to 

correct the inequities that have taken place there and the actual 

operation of it. 

At the same time, opening up in the competition field in this, in 

the other area where you have got competition taking place between other groups, whether it is with cable, or wireless, or satellite. So you do not limit our ability to create facilities-based competitors, particularly from the phone companies in that last mile, 

and the backbone, but particularly that last mile of getting highfiber, high-speed, high-quality. 

We ought to be going where the Koreans are with this; to be able 

to get the access to the really fast high-quality delivery of services. 

And I think if we do that, you are going to see a flourishing of services that would be available with that. 

I do not know what—I would take it you would be open to that 

sort of negotiation and discussion with it? I believe you have created one just that way. 

Mr. TAUZIN. Let me comment, Senator. That is exactly correct. 

What we added wasn’t just a tenfold increase in penalties or even 

a twentyfold for repeat bad behavior. What we have given the Commission under our bill is cease and desist authority which is to say 

for the first time instead of the Commission having to wait for a 

Bell Company to come in and say I’d like to get in long distance, 

and here’s what I’ve done to open up my market, it gives the Commission to chance to examine whether they have opened the market and whether they are trying to do something with it just or not, 

and to say you are not treating the competitors, the CLECs, correctly. You are not opening up your markets. You are not exchanging customers the way you should be exchanging customers. 

You are not treating the CLEC’s customers the same way you 

are treating your own customers, and we order you to cease and 

desist or we’ll take you to court with an injunction if you don’t. 

You can’t do that on the current law. Our bill would give them 

that new authority. If there are other ways to improve on that 

sanction, Senators, to make sure that the Bells, whether they want 

36

to get long distance or not, fairly treat competitors in the local system, we are very open to work with you to strengthen it, improve 

it, build a different mousetrap if you want. 

Mr. DINGELL. I would like to echo that. I would like to say, Senator, you put your finger on a very important point and I want to 

thank you for it. I would like to make this observation in addition 

to what Mr. Tauzin said. 

The powers we have given the FCC are exactly the powers that 

the chairman of the FCC said he and the Commission have to have 

to open up the local service net of the Bells to assure that the problems that concern the Chairman, Mr. Hollings, finds so oppressive. 

And I would also note one thing, that until the Bells have addressed the problems that the FCC has, they are not going to get 

into long distance voice communications. It’s just not going to happen. 

And I would note that they are compelled to submit and have 

been to the Commission as many as 270,000 pages of exhibits 

alongside which the Commission has rested most tranquilly and 

given no decision on, after enormous expenditures by people who 

are applying for relief from their government, and on which they 

receive no advice from the Commission as to what it is that’s 

wrong. They say if you want to get some relief, submit us another 

270,000 pages. Seems to me not to be a wise way to run the company. 

Mr. TAUZIN. If I can add one more thing that I think we ought 

to have on the table, that is when it comes to local competition, one 

of the problems is that in the residential market as opposed to the 

commercial market where there is a good profit margin, that 

incentivizing a competitor to come in and compete in a low margin 

marketplace where price is already subsidized through universal 

service is a difficult task. 

The competitor, you may say my market is open to that competitor. He may choose not to compete. In fact in many of the CLECs 

don’t even try to offer telephone service, residential telephone service. All they are trying to do is get into broadband services. 

And so they use the high frequency part of the copper wire to deliver broadband services and they don’t offer telephone service at 

all. Check the record. That’s a fact. 

And the reason they don’t is because in residential areas there 

is not a lot of money to be made. It’s a high-cost, low-margin area 

that we end up subsidizing in order to make sure people in sparsely populated areas in America get that service. 

But when it comes to broadband service, let me make this point. 

It’s important. Distance becomes irrelevant. Everything about the 

old regulations on the telephone systems of America were about 

distance, how far we lived from one another, how far was a call 

going. 

On the Internet, it doesn’t matter whether you live in Tokyo or 

whether you live in South Carolina or Michigan or Louisiana. You 

can speak commonly to anyone on that system without regard to 

distance. 

It’s a distance irrelevant system. It makes no sense for us to continue distance relevant regulation on a distance irrelevance system. 

37

Senator BROWNBACK. If I could in my remaining time, Mr. Chairman. I think we have had a chance for a two-fer here, actually to 

create competition in that local market sector, where there has 

been a lot of difficulty here, and in crafting this such that it gives 

some real teeth to the FCC. And you really give a chance to people 

to get at a problem that was not, frankly, as people thought it was, 

addressed in the Telecom Act. 

At the same time, we can then create a quality of broadband deployment and competition that we need to have. Because right now 

we just do not have it out there. We have got some cable companies 

that are pretty much dominating the field. They need to have more 

competitive pressure. 

There is competitive pressure we can get there. We can get that 

fiber, the last mile, which is going to be expensive, very expensive 

to do. It is a low-margin area when you go in residential, that last 

mile with fiber or in my state to be able to get a build-out into 

rural areas which your legislation requires it would have to be 

done over a period of 5 years. That is a real expensive matter to 

string that out to my parents that are a few miles away from town. 

And that would require them to do that. 

So I look at this and see we have got a chance, really, to do 

something that is going to spur the economy on substantially, and 

to correct an inequity in a prior act. We could take advantage of 

both of those. I hope—I would like to go to work with the Chairman to do just that. Thank you. 

The CHAIRMAN. Senator Dorgan. 

Senator DORGAN. Thank you. Let me ask a question about the 

issue of the Ag Conference. Because I mentioned in my opening 

comments that there is a report in Congress Daily A.M. this morning that the provision that was put in the Ag Conference dealing 

with incentivizing the build-out of broadband is a provision that is 

under some assault. And my understanding is the two of you have 

actually become conferees to the farm bill. Congratulation. 

Mr. DINGELL. We will make it better. 

Senator DORGAN. Long recognized experts on wool and commodities programs. 

[Laughter.] 

Mr. TAUZIN. I grew up on a farm, Senator Dorgan. 

Senator DORGAN. But I understand you are there because you 

are concerned about the RUS provision. And let me—let me ask 

this question. You indicated that this is a marketplace of ideas. 

You have won. You have passed it through the House. If we have 

other ideas, you are interested in hearing them and embracing 

them. 

One of those ideas in the farm bill that comes from the Senate 

to conference is to provide some low-interest loans under certain 

circumstances to help accelerate the build-out of broadband. 

My understanding is that, Congressman Tauzin, your staff is 

making some impassioned pleas in opposition to that provision in 

the farm bill and conference. Is that accurate? 

Mr. TAUZIN. We have two problems with the provision drafted in 

the formula, one is in the formula. It is extraordinary that we have 

to be on that conference. We shouldn’t have to be. It’s a teleVerDate 0ct 09 2002 09:53 Dec 05, 2005 Jkt 093635 PO 00000 Frm 00041 Fmt 6633 Sfmt 6601 S:\WPSHR\GPO\DOCS\93635.TXT JACK PsN: JACKF
38

communications matter which hopefully will be decided in the telecommunications conference. 

Second, we have problems with the whole idea of giving some of 

the competitors low-interest loans and not others. And that is what 

the provision does. It provides low-interest loans for some in this 

marketplace but not for all. 

And I know you disagree with that. We believe that that is what 

it does. And so we have to have that cleared up as well. 

Let me also say, Senator Dorgan, the quotes you have made 

though about us sending you a signal, telling the Senate you won’t 

get anything without accepting Tauzin-Dingell, that is a quote by 

one of our opponents. I hope you recognize that. I’d like the record 

to reflect that. 

Senator DORGAN. The first quote is a Tauzin spokesman. We are 

sending a message that we are the Committee of jurisdiction. 

Mr. TAUZIN. Yes. 

Senator DORGAN. That’s a Tauzin spokesman. 

Mr. TAUZIN. That is accurate. 

Senator DORGAN. That is not an opponent of yours. 

Mr. TAUZIN. That is accurate. We have a jurisdictional problem 

with the form, legislators of the Congress writing telecommunications policy. We have had that problem in past years. We have 

it today. 

We are not saying that the policy may be wrong in the end. But 

when it came time for us to provide low-interest loans, for example 

local into local, for rural communities, it came through our telecommunications Committee, not through the form agricultural 

Committee. 

Senator DORGAN. But we have had a real telephone co-op program for 50 years in the Agriculture Bill. Do you not agree? 

Mr. TAUZIN. Which is a part again of the telecommunications policy of the country. And as I said, when it came time for us to put 

together low-interest loans for rural parts of America to get local 

into local satellite service, that properly came through the jurisdictional committees of the telecom. 

And that’s our argument here. We stand by that. We would not 

like the Agricultural Committee deciding broadband policy. It’s 

that simple. 

Senator DORGAN. My only point here is that if you come to us 

and say, look, if there are other ideas out there, let’s hear them. 

I’ve introduced a broadband REA program which is low-interest 

loans for the deployment of broadband. 

The telephone program in RUS has been there since 1949. This 

is not some new thing. And I guess when you say to us let’s hear 

new ideas, we have got one in an Ag conference. And you are the 

one that’s sending a spokesperson down there, I guess not that you 

do not go down there, and say I oppose it. 

If you really want to build-out a broadband, why not embrace a 

range of ideas including the tax credit, Rockefeller proposals, the 

broadband REA program, the provision at RUS. Why would you oppose any of them? 

Mr. TAUZIN. The answer is we don’t oppose the ideas. 

Senator DORGAN. But you are trying to kill it. 

Mr. TAUZIN. We oppose it on jurisdictional grounds. 

39

Senator DORGAN. But you are trying to kill the provision; are you 

not? 

Mr. TAUZIN. No, sir. We are not saying that the provision properly addressed in a telecommunications broadband bill is not a 

good provision. 

Senator DORGAN. You are trying to kill the provision——

Mr. TAUZIN. We are trying to say that it doesn’t belong in the 

Farm Bills. 

Senator DORGAN. But you are trying to kill the provision in the 

Ag conference; are you not? 

Mr. TAUZIN. We are trying to say get it out of the Farm Bill. Yes. 

Senator DORGAN. That is all I am asking. 

Mr. TAUZIN. We are also trying to say that if you are going to 

write a provision like that, it needs to be written in a way as we 

did the satellite low-interest loan program, local and local, it has 

to be written in a way that all the participants in that business 

have a chance——

Senator DORGAN. Well, that is exactly the way this is written. 

This is technologically neutral. But my point is this: Do not say to 

us we want to embrace a lot of other ideas and then be over in that 

conference trying to kill that provision. But I guess that is a subject for another day. 

Mr. TAUZIN. It is not the idea, it is where the idea is located. We 

suggest that——

Senator DORGAN. If it is not your idea, it is not worthy? 

Mr. TAUZIN. No. We are saying that it ought to be addressed as 

part of broadband policy, not foreign policy. 

Senator DORGAN. But people who do not get access to broadband 

because this provision gets killed are going to have a hard time understanding, well, the issue really was just jurisdiction between 

Congressman Tauzin and Senator Hollings. 

The fact is we are interested in doing a lot of things that work. 

And this is one. And I would hope very much in conference the two 

of you will not deign to——

Mr. TAUZIN. We will visit with you. But you came from the 

House, Senator Dorgan. And you know there is a difference in the 

way we operate. We have rules, jurisdictional lines that our committees and subject matters come under. 

We understand that it’s different here. We understand that. But 

when it comes to the way we proceed and we write broadband policy, we are simply saying that this ought to be part of broader 

broadband policy, not simply something done for one segment 

under an Agricultural Bill. 

Senator DORGAN. Congressman Tauzin, that—these kinds of provisions dealing with telephone and especially the build-out in rural 

areas have been in the Agriculture Bill since 1949. There has never 

been a default in the rural telephone co-op program. 

But I just, I urge you take a new look at that. Do not be in there 

trying to kill that. If you want to work with us, work with us on 

a wide range of issues, including that. 

Mr. DINGELL. Let me make a comment because I’ve not had anything to say about this matter, and my staff has not had anything 

to say about it. I just would make a couple of observations I think 

are useful. 

40

First of all, I think as a Member of this Committee, you want to 

see to it that something in this country is done, it is done right. 

Second of all, as a Member of this Committee I think you want to 

see that if anything is done that it relates intelligently to the rest 

of our telecommunications policy. 

I do not think there is anything wrong with either one of those 

positions. Those make eminent sense. We enforce those kinds of situations in the House by seeing to it that we protect our jurisdictional concerns of the committees. Because the committees usually 

know better what they are doing on their particular subject matter 

than do other committees. 

Now, having said that, it is very clear to me that the Senate 

wants to discuss this. Mr. Tauzin and I are prepared to discuss this 

with the Senate as conferees on behalf of the House. And we are 

prepared to try and work with you on these matters. 

But we do want to make it very clear and very sure that I think 

you and we want to see to it that this is done in a way which 

doesn’t conflict with other policies. If that is done, I don’t have any 

objection at all to making loans to assist this. This makes good 

sense. 

But I would just note one thing for the benefit of everybody in 

the room, and that is if you look carefully, you’ll find that all of 

this comes out from somebody who is opposed to Tauzin-Dingell. 

And I would say that talking to Tauzin and Dingell might give you 

a better way of getting an appreciation of both what Mr. Tauzin 

and Dingell think but also it would give us a better chance of having an intelligent discussion in which the matter could be properly 

dealt with. 

Senator DORGAN. And the paragraph says, ‘‘We are sending a 

message that we are the Committee of jurisdiction when it comes 

to telecommunications issues,’’ says a Tauzin spokesman, talking 

about the issue of the conference Committee. 

Mr. DINGELL. It comes out of the lips of an opponent. 

Senator DORGAN. No. No. You are wrong about——

Mr. DINGELL. Said that the devil may talk——

Senator DORGAN. You are talking about a different paragraph, 

my friend. You are wrong about that. 

So I’ve just read the paragraph, we are sending a message that 

we are the Committee of jurisdiction, said a Tauzin spokesman. 

But I understand the paragraph you are reading, but understand 

the one I am reading as well. 

Let me ask a question, if I might, about how deregulation would 

do anything to change the status quo in a state like North Dakota. 

Because obviously I have a parochial interest here and this is national policy, but I have an interest in North Dakota. 

Let me describe to you what has happened in North Dakota. We 

have had DSL being offered now by 157 of the 231 rural exchanges 

in North Dakota. The end of next month another 13 will be bringing that total to 170 out of 230. 

These are the rural telephone co-ops in most cases, and independent phones. And with respect to Qwest that has sold off many 

of its exchanges in our state, they offer DSL in 4 of the 24 exchanges it has. 

41

Now, can I get your opinion, why would Qwest, a big old company that has done a lot of business in North Dakota over many 

years prior to selling some 60 or so exchanges, 76 exchanges, why 

would it offer DSL do you think in only 4 of 24 exchanges. 

Mr. DINGELL. First of all, I am not an officer, employee or shareholder of Qwest. 

[Laughter.] 

Mr. DINGELL. So I haven’t the vaguest damned idea why Qwest 

does things. And I don’t think anyone else in this room unless they 

work for Qwest does. 

I would only tell you that if you want to get service and you want 

to propel them to offer this service, there is a good way to do it. 

And it is in H.R. 1542. 

First of all, Tauzin-Dingell requires them to provide that service. 

Second of all, it eliminates obstacles to investment by Qwest in 

that. So we give you two things. One, we give you the carrot; and 

two, we give you the stick. 

Senator DORGAN. And what is the obstacle that exists with respect to Qwest providing DSL service beyond four exchanges? 

Mr. DINGELL. I’ll quote a well-known authority, Michael Armstrong, November 2, 1998. ‘‘No company will invest billions of dollars and become a facilities-based broadband services provider if 

competitors who have not invested a penny of capital nor taken one 

ounce of risk can come along and get a free ride on the investment 

and risks of others.’’ And that does not apply to rural exchanges 

why, Mr. Tauzin? 

Mr. TAUZIN. That statement applies everywhere. 

Mr. DINGELL. It applies everywhere. 

Senator DORGAN. No. I am talking about the lack of incentive 

that apparently exists with the Qwest company does not apply to 

the local exchanges in North Dakota, the rural telephone co-ops in 

the rural exchanges. 

Mr. TAUZIN. No, it applies to them. The only difference is that 

when——

Senator DORGAN. They are building out. 

Mr. TAUZIN. Yes. When they buy one of these areas, because they 

are basically buying a rural area only and they don’t have an 

urban area as well in the service area, they are actually getting 

subsidies under the universal service fund from another company, 

not themselves, which then allows them to make some of the upgrades and services that they in all likelihood may not be deemed 

to be profitable at the time. 

So the idea that they sell these off the company that can because 

of universal service rules actually pick up—universal service funds 

to help them do it, is probably a good thing in your area. 

Mr. DINGELL. We have got two situations. First of all, let me remind you that your small local service companies are not compelled 

to meet the same tests that the Bells are compelled to meet. So this 

does affect them. 

Senator DORGAN. Well, we don’t have a traffic jam with competition in these areas. 

Mr. DINGELL. The only situation you confront here is the local 

service companies, the little independents, they are not compelled 

to provide these services. The Bells are. 

42

But the interesting thing is that the question you should really 

be asking is why can’t and don’t these small local companies then 

offer the service. I can explain why the Bells don’t. You have got 

to ask the question. 

Senator DORGAN. My point is they are offering the service. That 

is exactly what I said to you today. 

Mr. TAUZIN. Senator Dorgan, there is an exemption. 

Senator DORGAN. There is an exemption in 251F that also can 

be taken away when the companies receive the bonafide request for 

interconnection services and network elements in the future. 

So——

Mr. TAUZIN. It is up to BUC to make that decision. 

Senator DORGAN. But that is in your bill. And my point is the 

same disincentive would apply to a rural telephone exchange that’s 

going ahead and making the investment for broadband deployment. 

The same disincentive would apply with 251F because at some 

point they might say, you know, somebody is going to come in and 

make a request, and I have got to share here. 

And you are saying that is why the Bells are not building out because of that disincentive. My point is rural telephone companies 

are. The Bells are not. 

Mr. TAUZIN. The answer is they are exempt to that and they are 

not covered. 

Senator DORGAN. They are exempt under 251F which—but they 

have jeopardy under that if someone later after they build the system wants to use it. And my point is——

Mr. DINGELL. They are not now covered. 

Senator DORGAN. But my point is in your legislation in 251F, it 

describes conditions under which they could be covered if someone 

wants to come in and require the sharing of that system. Now, you 

are getting a lot of advice here on this question——

Mr. TAUZIN. But the question, Senator, is how many times has 

a CLEC gone to BUC and asked that the exemption been waived? 

Zero. 

Senator DORGAN. My only point is this——

Mr. TAUZIN. There is no jeopardy right now. 

Senator DORGAN. My time is about up. But in North Dakota, 

Qwest has been serving North Dakota. It moved off 74 exchanges, 

sold them. You are saying it did that in order to avoid the responsibility of universal service so it could come out of a different fund. 

Mr. TAUZIN. No. No. No. I did not say that. What I said was that 

for Qwest to upgrade those systems, it has to use moneys that are 

subsidized within it own system from urban consumers. 

When they sell off one of those areas and the company owns just 

the rural area, then the subsidies come from Qwest, from some 

other company. So that company can then use those subsidies not 

generated in its own company to actually make those improvements. 

They tend to have a better economic position to make those improvements. Second, they enjoy an exemption. So they are more 

likely to do it. 

Senator DORGAN. I guess I wanted to ask a series of questions 

about universal service which I think is the most important issue 

43

for me and I think will be an area that is a very serious problem 

with respect to your bill. 

I unfortunately have another hearing I have to attend, but I—

let me, Mr. Chairman, just make one final comment. I have taken 

more time than perhaps I am owed. 

My experience in North Dakota is that the Qwest company, it 

has very little interest in building out DSL, just very little interest. 

Now, I think we have got a lot of great companies around this company, including the old baby Bells, and the new CLECs and others. 

They are all great companies. 

Every company must do what is in its self interest. That is the 

way life works. That is the way it is with those companies. 

Mr. DINGELL. We agree. 

Senator DORGAN. And so what happens is Qwest decides in 

North Dakota we are not going to build-out DSL. What we are 

going to do is we are going to create a circumstance where we can 

get somebody to come to Congress and get rid of 271, and get rid 

of other provisions of the 1996 Act. 

And they say, if we can just get these folks to do that, guess 

what happens. We get out from under something that they required in 1996 by which at some point we are going to have local 

competition that is aggressive. 

Mr. DINGELL. We are not letting them out from under 271. 

Under 271 they remain under the constraints of 271 for all voice 

services. 

Senator DORGAN. But that is the mixed message here. 

Mr. DINGELL. And they also remain under 271 which is substantially identical. 

Senator DORGAN. But that is interestingly enough the mixed 

message here. You want regulation, in fact I think you might have 

said even more regulation for voice transmission, but you are in 

here with a bill that talks about deregulation. 

Mr. DINGELL. We are not addressing voice. 

Senator DORGAN. Is the value of one not the value of the other? 

I do not understand the message I guess. 

Mr. TAUZIN. To answer, we have not increased regulations on 

voice transmission. We increased the authority of the Commission 

to enforce the current regulations. 

Senator DORGAN. Which means nothing of course. 

Mr. TAUZIN. Second, if you really want Qwest to deploy, vote for 

this bill. Under our bill they are mandated to deploy over a 5-year 

period to every community in South Dakota. 

Mr. DINGELL. If you want everybody in South Dakota covered, 

vote for our bill. If you do not, vote against it. Very simple. 

Senator DORGAN. I guess your bill is what Qwest has been angling for. That is the reason for their not deploying, I suppose. 

Mr. TAUZIN. Qwest backed off of the coalition in support of the 

bill for the most part because of the mandate. Because they don’t 

think they can afford it. The fact is the mandate in the bill will 

force Qwest or any provider in the country among the Bells to actually deploy over 5 years. Qwest doesn’t particularly like that provision. 

Senator DORGAN. I will tell you what I want. I want aggressive, 

robust competition in local exchanges, Number 1. Number 2——

44

Mr. DINGELL. Then vote for H.R. 1542. 

Senator DORGAN. I want—well, you know, I had said when I 

started, I have heard that every morning while I was shaving, vote 

for Dingell-Tauzin, Tauzin-Dingell whichever it is. But I want robust, aggressive competition in local exchanges. 

Mr. TAUZIN. So do we. 

Senator DORGAN. We are only going to get that if we keep pressing on this issue on the 1996 Act. And second, I want ubiquitous 

broadband deployment everywhere in the country, just as we did 

with electricity. 

And I again will end where I started. I regret that at least one 

idea by which we might enhance the lives of some with respect to 

the RUS provision in the Ag bill, I hope very much that I will not 

have to regret your trying to kill that. 

Go into that conference Committee, you two people on the——

Mr. TAUZIN. You read a lot of the quotes. Did you read the one 

that says we are not trying to kill the provision per se. Read the 

quotes. 

Senator DORGAN. Yes, well, read the quotes of your staffer that 

is in the conference, in the staff conference saying——′′

Mr. TAUZIN. It says we want to protect our jurisdiction. No. 

Senator DORGAN. Well, I’m sorry. 

Mr. TAUZIN. It says we want to protect our jurisdiction. We are 

going to do that. 

Senator DORGAN. All right. First of all, thank you for coming. 

Mr. TAUZIN. Thank you, sir. 

Senator DORGAN. It was really good to have you here. 

[Laughter.] 

Mr. TAUZIN. It was good to be had. 

[Laughter.] 

The CHAIRMAN. My list shows Breaux, Allen, Nelson and then 

Hutchison. 

Mr. DINGELL. Mr. Chairman, I apologize, but I do have other 

business. Thank you very much for having us here. 

The CHAIRMAN. We appreciate very, very much your appearance. 

Senator Breaux. 

Senator BREAUX. What round are we in, Mr. Chairman, about 

our 14th, 15th round here? I will, again my line of questions to my 

good friend and colleague, Congressman Tauzin, starting where I 

left off, and where I left off was I think one thing we can all agree 

on, that everybody wants a level playing field and for people to 

compete. And we all want competition. 

And then everybody departs about what we think will bring 

about fair competition in these areas of broadband services and 

others. I happen to think that, it seems to me, and I want to ask 

my friend, I have got a list, I guess we got it from the local carriers 

and the DSL providers, but what they did, and I would like to ask 

you now is consent to make this chart a part of the record, because 

I know you have the intentions made——

The CHAIRMAN. Admitted. 

[Information referred to follows.]

45

Senator BREAUX.—and I want to—I want to ask Congressman 

Tauzin some of the questions. As I understand, I mean, I have got 

one cable that provides all my cable service. I cannot find anybody 

else to provide cable service. It is one cable, it is a monopoly. 

And they provide video and movies. And they provide telephonic 

communications. They provide broadband service. And there is no 

competition for them. 

The same thing if you have a satellite, it provides movies and 

also broadband. There is no real competition for them or for a fixed 

wireless service. And the chart I have is almost unbelievable to me 

with regard to the regulatory requirements is what applies to the 

local phone companies trying to operate in this competitive mode 


320chart.eps
46

as applies to what regulations applied to cable, satellite and fixed 

wireless. 

I take it, Congressman Tauzin, that the regulatory requirement 

of the common carrier duty to provide service at just and reasonable prices for high-speed Internet service does not apply to cable 

and does not apply to satellites and it does not apply to wireless 

but it applies to the local phone companies. 

Mr. TAUZIN. That’s essentially correct. There is a proposal, there 

is still an open area about whether the Commission might at some 

time in the future require the cable companies to carry another 

Internet service provider. For example, they have not made that 

decision. 

As we sit here today, they have decided just last week that 

broadband services are essentially not telecommunications services, 

but data services, information services. 

Senator BREAUX. Is there a common carrier duty prohibiting discriminatory treatment that applies to the local phone companies 

but not to satellites and not to cable? 

Mr. TAUZIN. That is correct. 

Senator BREAUX. Is there a duty to provide network to Internet 

service providers that applies to the local phone companies but not 

to cable nor satellites? 

Mr. TAUZIN. That’s correct. 

Senator BREAUX. Is there a duty to file tariffs for the local phone 

companies but not to cable and not to satellite? 

Mr. TAUZIN. That is correct. In fact, one of the members, Mr. 

Chairman, came to tell me yesterday on the floor that his local 

cable provider doubled their broadband rates the day our bill 

passed, just a monopoly taking advantage of their monopoly situation as long as they can. 

Senator BREAUX. Here is what I really—what I really want you 

to elaborate on. Is there a duty to interconnect with competitors at 

below-cost prices that would apply to local companies but not 

to——

Mr. TAUZIN. It applies to telephone but not to cable. 

Senator BREAUX. As I understand it, even under new broadband 

equipment that would be added to the system, henceforth forward, 

that the price that you would—that local companies would have to 

sell to their competitors would not be the just and reasonable 

standard but it could potentially and in some cases is a requirement to sell below their actual cost of installing new equipment? 

Mr. TAUZIN. It’s true on the old legacy system, on the old copper 

system. In our bill we would say insofar as——

Senator BREAUX. But without your bill? 

Mr. TAUZIN. Without our bill, they could theoretically be obliged 

to share their new investments at below cost, which is kind of 

nutty. 

Senator BREAUX. We all talk about the level playing field and we 

all agree with it. And I think what I would like, I want competition. I do not want one phone company. I do not want one cable 

company, which we have. 

I do not want one satellite service, which, you know, I want the 

competition and I think it has to be balanced competition. I do not 

want to vote for a bill that only helps one phone system. 

47

But I think that what we have here is one that I am very concerned that the current system does not provide the balance that 

even competition, that is our goal for all of us. 

Would the bill still require the local phone companies to provide 

access to the new equipment under a just and reasonable standard? 

Mr. TAUZIN. Yes. Our bill would say that as to all the new investments and fiber to the homes, the last mile, the remote terminals, 

all the equipment by which the CLEC which is currently using the 

legacy systems at below cost would need if they didn’t want to 

make their own investments in that right away that they could use 

the Bell Company systems at rates, terms and conditions set by the 

Commission. 

That is important, not just the price but the terms and conditions. In other words, they could define the speed requirements for 

the competitor as well as the conditions of service and connection. 

All of that is still required under our bill at rates, terms, conditions 

set by the Commission. 

Senator BREAUX. And is that where the just and reasonable 

standard comes into play? 

Mr. TAUZIN. Yes, sir. 

Senator BREAUX. Without the bill, I mean, I heard the companies 

say, Look, we are not going to go out and build all this stuff if we 

have to give access to our competitors at below the cost of building. 

We are just not going to do it. 

Without the bill is that where the problem is, one of the problems? 

Mr. TAUZIN. There are two problems, that problem and the cost 

of the LATA lines, the inability to cross those LATA lines. 

It would be a little bit, Senator Breaux, like you and I lived on 

the same street. It’s like all our neighbors coming to you and saying, Look, Mr. Breaux, we’d like you to buy a new car that the 

neighborhood would like to use, but understand you won’t be able 

to use it except to get up and down the driveway. 

But we can take it anywhere we want and we can use it at below 

your cost. But you can’t use it except to go up and down your driveway. Would you buy that car? The answer is no. 

No company would make those kind of investments without 

being able to use it, Number 1, and equally as anyone else. Number 2, they certainly wouldn’t make it so that they have to give it 

away at below cost. It’s that simple. 

Senator BREAUX. So the legislation then would I guess if—my 

last question—if the companies, the local exchanges build new 

broadband equipment, they would still be required to give access 

to that new system to their local competitors but at a just and reasonable standard as opposed to what the——

Mr. TAUZIN. That is correct. In fact, we give the competitors an 

additional option. If they want to build their own system inside of 

that right-of-way, the Bells have to allow them to do it. They can 

either use the Bells’ systems, all these investments they make, at 

just and reasonable rates set by the Commission, or they can build 

their own facilities in those right-of-ways provided by the Bells’ 

companies. 

Senator BREAUX. And the charges would still be, for the access 

would still be FCC determined? 

48

Mr. TAUZIN. FCC would determine it, not the Bell Company. 

Senator BREAUX. All right. Thank you. 

Mr. TAUZIN. Thank you. 

The CHAIRMAN. Senator Allen. 

Senator ALLEN. Thank you, Mr. Chairman. Let me followup on 

a variety of issues that have been raised, since you are the sole one 

here, Congressman Tauzin. 

Again, I think you are seeing out of this Committee unanimous 

views that obviously we are looking at the best way to make 

broadband available in all communities. It is mostly in rural communities. The key is for businesses, Number 1. 

If those businesses are going to survive, they need to have access 

to broadband. To a secondary extent but still important, syndication, medical. And then consumers simply aren’t going to it as 

much as people would expect. 

What I am trying to figure out in all of this is listening to all 

the different perspectives and one of the things that is just a basic 

disagreement seems to be an understanding of the factual basis we 

are starting from. Now, granted, that may be, say, broadband penetration is only 10 percent, true. But on the other hand, there is a 

disagreement with the Chairman and also apparently with the 

FCC’s views that 78 percent of all the zip codes have access to 

broadband, but you still have the 10 percent accessing it. 

Then we have gotten into not only that difference, a perspective 

of what the situation is right now, but then arguing over Committee processes and so forth and merits of ideas seem to be ignored in the midst of this. I am one who doesn’t care about process 

or politics, I like the merits of ideas. 

And I have, as Chairman of the High-tech Task Force in the Senate for the Republicans, we have made, Senator Ensign is on our 

task force, made broadband a top priority. 

Mr. TAUZIN. I saw that. 

Senator ALLEN. We have worked for the broadband tax credit on 

Senator Rockefeller’s bill. That is a bipartisan effort. And that bill, 

just for your information, one of the things I wanted before I signed 

onto it, wanted to make sure was that it was technology neutral. 

Now, let me widen this discussion and get your views on this. 

And you mentioned, and I very much appreciate it, the concept of 

new ideas. If you do not like what we are doing, come up with 

something better or maybe add on, or draft it, or make some 

changes. And understand that in my Commonwealth of Virginia 

there is a lot of CLECs that have relied on the laws and those concerns are I think understandable and legitimate. 

Now, as far as broadband, they can be delivered by cable. They 

can be delivered by DSL where there are CLECs or the Bells. What 

are missing in a lot of this discussion are satellites and wireless. 

One thing that I would be interested in hearing your opinion on 

is the issue of spectrum management reform, specifically reallocating or freeing up more spectrum for the use of wireless technologies as an alternative means of delivering broadband capabilities. 

The very same reason why there is not cable in all areas, mountainous areas of West Virginia or Southwest Virginia or elsewhere 

49

is because there is too much dirt to dig. And so there are satellites 

for it. 

But the same sort of concept or paradigm seems to me to be out 

and hopefully applicable to try and deliver broadband, maybe not 

by fiber, but by wireless or satellite capabilities. What are your 

views on spectrum management reform? 

Mr. TAUZIN. Well, you actually touched on a number of topics including that one that need to get addressed if we are going to get 

content, rich content in these systems. One the Chairman is vitally 

interested in is content protection, which I share very much the 

Chairman’s views on pushing the industry as rapidly as possible to 

settle those content issues with the recognition of fair use for consumers being considered, that is the right for us to make copies in 

our homes on our home video systems, et cetera. 

We have got to work that out quickly. And, Senator, we are having meetings every week with the industry trying to push them as 

you have, you were talking about legislation to push them as well. 

So content protection and recognition of consumer rights are key 

issue spectrum, key issue. 

Just recently the Commission issued an order on ultra broadband 

wireless technology. I think it was much too narrowly placed. I 

think it has much more potential than the Commission has yet to 

authorize but they are up against the Defense Department. They 

are up against the Transportation Department and others who 

have resisted this new technology because they obviously are concerned about spectrum invasion, spectrum interference. 

We’ve got to settle those issues. This ultra broadband wireless 

technology could be one of the ways in which we settle that last 

mile concern and get the last mile connections from cable heads or 

telephone or de-slam systems into homes. 

It is a key ingredient. So working the problems out with the Defense Department and others who have an awful lot of spectrum, 

we’d love to work with them to get more out in the public so we 

can have new wireless systems, particularly these ultra broadband 

wireless technologies available is something I am keenly interested 

in, and our Committee on the House side is aggressively pursuing. 

Second, we are trying to get the digital transition completed. 

Part of what the Chairman of your Committee is doing with his potential legislation and what we are doing at hearings is to push the 

technology side of the equation hard so that the broadcast side can 

meet their mandate deadlines. 

If we can get the digital transition done, if we do that, then we 

can have the kind of rich, hot, sexy content provided to broadband 

that Americans are going to want to sign up for. It is that simple. 

If we have the protections built in, if we have the industry in the 

digital age speaking computer language, we’d have spectrum available for new technologies to come in, we are well on our way with 

a combination of a bill that deregulates and opens up more competition. 

I want to make one other point to you because I know of you and 

Senator Ensign’s work on your committees. I’ve got two letters that 

I want to leave with you. One is from the TIA and one is from the 

ITI, the two high-tech industry associations in this town repVerDate 0ct 09 2002 09:53 Dec 05, 2005 Jkt 093635 PO 00000 Frm 00053 Fmt 6633 Sfmt 6601 S:\WPSHR\GPO\DOCS\93635.TXT JACK PsN: JACKF
50

resenting the great bulk of all the high-tech industries who depend 

upon these new technologies for their existence. 

Both of them came out against the attempt in the House to give 

the CLECs below-cost access to these new systems the Bells would 

deploy. Both of them urged the House not to adopt the Cannon 

Amendment, in fact to oppose them rigorously. And I share these 

amendments with you. 

They are basically saying they agree that the broadband deployment is critical, along with these other issues you have raised. And 

they are basically saying for heaven’s sakes, don’t disincentivize 

the Bell companies for building these systems by forcing them to 

sell them at below-cost rates. 

Senator ALLEN. These are important letters and I leave them 

with you for your consideration. Thank you. 

The CHAIRMAN. This is—I think it is Senator Ensign. 

Senator ENSIGN. Thank you, Mr. Chairman. This is, and I think 

we are seeing it today, and I mentioned in my opening statement, 

about the complexity of the issue. When we talk to some of the 

IXCs, they complain about the jurisdiction we had taken out of the 

local authorities and put into the FCC—and we know how efficient 

the FCC is in getting back to things. Given this rapidity or lack 

thereof with the FCC, do you think this is an appropriate place for 

adjudicating issues dealing with the IXCs? 

Mr. TAUZIN. Well, first of all, the only exemption we’ve given the 

local regulations is in Internet area. And that is a question I hope 

you think about in your conference, is that whether or not we 

ought to make a policy in broadband that says that local regulators 

can regulate the Internet. 

I would hope we decide as we do in this bill that, no, that ought 

not be the function of local regulators. The Internet is not only 

international, interstate, it is international is my point. 

It is not something that ought to be the subject of rate terms and 

conditions set by a local BUC. Second, the FCC is the most appropriate agency to make sure that Bell carries out its provisions requiring the open access to CLECs and other competitors under 

these new systems again. Because they have literally been the enforcers of the rights and responsibilities for the Bells when it comes 

to the CLECs enjoying their rights on the current legacy systems. 

We think that’s appropriate. 

Again, we are talking about—we are not talking about local 

phone services between two towns in Louisiana and Nevada. We 

are talking about Internet service. 

Broadband is essentially rich content Internet. I’ve been asked to 

explain it to people back in the hunting camps, fishing camps back 

home; what is all this broadband talk. 

And I try to give them a simple example. It’s like going to the 

refrigerator under the current Internet world and finding your refrigerator off. You open it up and your beer is hot. 

And you have got to turn it on and wait for the beer to get cold. 

And you are sitting there waiting, waiting. Finally, you dial it up 

and it gets cold and you enjoy your beer. 

But broadband is like going to a refrigerator that is always on, 

is always cold. And when you open the door, it is like beer city. 

[Laughter.] 

51

Mr. TAUZIN. You have got every variety of beer you could possibly want, all of the wonderful rich content that you deserve when 

you are at a good fishing camp in Louisiana. 

The bottom line is that that’s what we are talking about. We are 

talking about Internet services essentially, data information services, not the old world local telephone. And you have got to separate that when you think about regulations and freedom. 

We have entitled our bill the Internet Freedom and Broadband 

Deployment Act because it does both. It keeps the Internet free of 

the hands of all these regulators who would love to tax it, regulate 

it, set terms and conditions, what you have got to carry and what 

you don’t have to carry, who gets on and who doesn’t get on. 

It keeps it out of the hands of all these regulators. And second, 

it fosters, it incentivizes much more deployment of the systems by 

which all this content, hopefully will get protected, get enhanced 

and get deployed in a digital television world. 

Senator ENSIGN. Mr. Chairman, we don’t have the Nevada analogies to be able to compete with cajun analogies, so hopefully we’ll 

have some South Carolina analogies that——

Mr. TAUZIN. Well, I think, you know, this is a gamble. 

[Laughter.] 

Senator ENSIGN. Yeah, maybe we can pick up all the casino analogies. OK. 

Mr. TAUZIN. Roll your dice. 

Senator ENSIGN. I just hope we do not get a seven out. 

The CHAIRMAN. I was wondering how Billy passed that bill in the 

House. That house crowd is hungry for entertainment. 

[Laughter.] 

Mr. TAUZIN. Senator, that is why we enjoined your visit to that 

Committee. You entertained us for about I think an hour and a 

half under our 15-minute rule, which we really appreciate. 

Senator ENSIGN. Anyway, I have another question. We have 

heard from some of our CLECs, especially the small CLECs in our 

state, under the Buyer-Towns Amendment. Do you think that—

they do not think that they will be able to compete with your bill. 

And they think that they are going to actually go out of business. 

How do you address that? 

Mr. TAUZIN. Well, I can only take you back to the National Academy of Sciences study. They said if you really want competition, 

you have to have facility-based competition. 

The idea of someone coming into your store and trying to sell 

your products at below your cost is a weird business proposition. 

You want to look at why so many have failed already, it’s because 

they are building their business on a model that doesn’t work. 

If they are coming into a store in that case, if the product’s already subsidized below cost, the residential phone market, and trying to sell those products in your store. The National Academy of 

Sciences, there have been a number of excellent studies done. 

Kato just did a beautiful study on the idea of poverty rights 

tapings. Why would we in Congress approve a law that says companies can go out and build brand new systems, that’s their property, that’s their shareholders’ property, and then have to give it 

away below cost. 

52

They won’t build them. What shareholder would support a president of the board that did that. We’d have some more Enron hearings, I suspect. 

So the bottom line is if you really want competition in this marketplace, encourage facility-based. That’s what the bill does. It says 

you are encouraged to build your facilities inside the Bell right-ofways. 

Now, if you want to use their investment, you can do that too but 

so long as you pay a just and reasonable rate for doing that. Now, 

what is wrong with that? What is wrong with that in America to 

say that while somebody can come and use your property, that they 

at least pay you a just and reasonable rate when they use it. 

And again, all of the IT companies, all of them said for heaven’s 

sakes, don’t force an investor to give away his property at belowcost rates. He just won’t make the investment. And we’ll all lose 

out. 

Senator ENSIGN. Mr. Chairman, I’ll just close with this, and that 

is, and it gets to the heart of the difficulty on the politics, you 

know, both sides accuse the other side of having a monopoly. And 

obviously, but yet both sides say that they want competition. 

And I think that our challenge is going to be truly getting to that 

competition because everybody wants to have competition in the 

other guy’s marketplace but they would like to have a monopoly in 

their own marketplace. And the key to us is to make sure that the 

legislation, whatever the final piece of legislation that we have, 

truly opens up everything. 

Because everybody benefits, including the companies, when there 

is true competition. They get better. 

Mr. TAUZIN. Do you remember when all of us got together and 

passed the Satellite Viewers Rights Act, beside the Cable Act? Was 

that in 1992? We passed over——

Senator ENSIGN. We weren’t there. 

Mr. TAUZIN. Anyway, but we had to do it over the Presidential 

veto. It was essentially the same issue. Did you want the cable 

company to be the only provider of television services to so many 

homes in America or did you want to give them another choice, an 

option in the sky. We had to fight, to duke that thing out. And the 

same interests were raised. I was told when I went to Florida, that 

amendment in the House, forget it. 

Just like Senator Dorgan said. You are never going to pass this. 

You cannot pass this bill. There are too many big companies arguing against you. 

Well, the House voted for it. And the Senate voted for it. I think 

Senator Al Gore was in charge here in the Senate. And we overrode 

a Presidential veto to make a law. 

And today, now 16–19 million Americans now enjoy a different 

choice of television programming than the cable company. I want 

to make sure they have the same choices in broadband, that they 

have a second store in town, Senator, a chance to go find some different content, something brand new. 

That is the least we can do for American consumers. We can’t—

we can’t create a job for everybody with this legislation, but we’ll 

create 1.2 million jobs according to one study. 

53

We’ll get this economy going. And we’ll give Americans control of 

this marketplace again, instead of all these big companies that are 

running Tauzin-Dingell ads and interrupting our shaving hour in 

the morning. 

Senator ENSIGN. Well, Mr. Chairman, I think we all have the 

same goals. It’s just a question of how we get there that will be the 

fascinating thing to watch. And I appreciate you holding these 

hearings here today. 

The CHAIRMAN. Yes, sir. Thank you. Senator Nelson. 

STATEMENT OF HON. BILL NELSON,

U.S. SENATOR FROM FLORIDA 

Senator NELSON. Thank you, Mr. Chairman. Mr. Tauzin, having 

just been to New Orleans just before Mardi Gras, I now understand 

why you use imagery of beer-filled refrigerators. 

Mr. TAUZIN. You know, I was asked why the travel to New Orleans only dropped 3 percent after 9/11 when it dropped so dramatically around the country. And the only answer I had was that 

when people come to New Orleans, they expect to die. 

[Laughter.] 

Mr. TAUZIN. I mean, it’s a great place. 

Senator NELSON. Well, I will tell you when I was jogging down 

on Bourbon Street at first light of day around six o’clock, they did 

not look very dead down there. 

I have got a number of questions for the record and I will not 

be long, Mr. Chairman. Because I know the time is moving on here. 

A GAO report of February 2001 found that most people did not 

want to pay a lot for broadband services. 

Mr. TAUZIN. Correct. 

Senator NELSON. And most households with access to the Internet were not—not planning on subscribing to broadband services at 

the current price range of around 45 to 50 bucks per month. 

Mr. TAUZIN. Fifty bucks, yes. 

Senator NELSON. Tell us about if your bill will lead to more demand and lower prices? 

Mr. TAUZIN. You could have made the same survey when it came 

to cellular phones when they were initially deployed in America. 

When there was only one cellular phone company or two perhaps 

because we made the good judgment to make sure there was a 

wired and a non-wired line distributor, the same arguments pertained. 

But then there were three, then there were four, then there were 

five eventual companies. The price war erupted. And the same 

thing can happen in broadband. 

If you want to bring prices down, get another store in town. It’s 

as simple as that. It is no more complex—they say this is such a 

complex issue. It is not, when you really get down to it. 

It’s a simple question of whether or not consumers are better off 

when there is only one store in town and that store sets all the 

prices, or whether they are better off when there is a second and 

third and fourth store coming to town and all of a sudden those 

folks are fighting for your business. 

And the prices come down in the price wars. And the services improve and the content improves as they keep bringing in new prodVerDate 0ct 09 2002 09:53 Dec 05, 2005 Jkt 093635 PO 00000 Frm 00057 Fmt 6633 Sfmt 6601 S:\WPSHR\GPO\DOCS\93635.TXT JACK PsN: JACKF
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ucts to attract you to their store. It’s a simple proposition, Senator. 

You create more stores, you help consumers. 

Senator NELSON. All right. Let me ask you about that chart. 

That chart seems to be the opposite of our experience in Florida. 

The Public Service Commission Chairman has written and says 

that Florida ranks well above the national averages in broadband 

deployment. 

And as I understand that chart, you are saying that there is no 

broadband in about 89 percent of the consumers. It says, According 

to FCC data, 87 percent of Florida zip codes are served by at least 

one broadband provider, 69 percent are served by one to three providers. 

And it says these percentages are above the national averages of 

59 percent and 49 percent respectively. Is there a disconnect there 

with your chart because they are talking about zip codes here and 

you are talking about something else there? 

Mr. TAUZIN. Absolutely. I think if America was one zip code, 100 

percent of America would be served by broadband. Does that make 

sense? The fact is you could have one customer——

Senator NELSON. What is that? That is on all customers? 

Mr. TAUZIN. That is the percentage of customers in America on 

broadband. If there’s one customer, generally a business customer 

in a zip code, that zip code is countered as being broadband served 

under those statistics. You have just got to watch how you read 

them. 

Senator NELSON. Is it of your knowledge that Florida is served, 

more consumers are served in Florida as compared to other states? 

Mr. TAUZIN. As compared to some other states you are. I think 

Florida is as advanced in deployment as the best of the states. But 

I don’t think it’s necessarily better than the rest of the country. I 

think the other parts of the country do compare with Florida. 

Senator NELSON. All right. Mr. Chairman, I would like to proffer 

a series of questions, if we could get just short answers. These are 

questions that have been proffered from the Chairman of our Public Service Commission and I would like to get your answers on the 

record. 

Mr. TAUZIN. That is fine. 

Senator NELSON. Does the bill undermine the incentives for Bell 

operating companies to open their local markets to competition? 

Mr. TAUZIN. We don’t think so. I mean, they have made that argument. What we have done is not only kept the carrot of long distance service under 271 in order to encourage them to open up 

their local market, we have added a stick. 

So today we are operating just under a carrot and it’s not working very well. We’ve only got a few states that have been through 

the process. What we are saying is maybe we need a stick too. We 

have added a stick. 

Senator NELSON. All right. Number 2, would the regional Bell operating companies lose their incentives to open up their markets if 

the data traffic were allowed across LATA boundaries? 

Mr. TAUZIN. The long distance market is about a $100 billion 

market, nothing to sneeze at. That’s pretty good incentive. Second, 

whether they have an incentive to or not, we have added power to 

the FCC to force them to open up their markets. 

55

Senator NELSON. Number 3, does the bill harm rather than help 

competition in broadband deployment? That is what we were talking about. 

Mr. TAUZIN. There is no question in our mind it enhances dramatically competition. If you don’t—if you like the current situation 

where you have got a 70 percent dominant player and the Bell 

companies are really reluctant to deploy because they would have 

to sell their new investments at below cost, then this is what you 

get. I think we deserve better than this. 

Senator NELSON. Next question, while the Florida Public Service 

Commission does not regulate the Internet, would the preemptive 

language in the bill keep the PUC from overseeing the nondiscriminatory application of terms and conditions in tariffs for high-speed 

data services? 

Mr. TAUZIN. Yes. It eliminates any regulation by the PUC of 

terms and conditions of service on the Internet. That’s correct. It 

frees the Internet from local regulation and it, however, it continues the power to examine the performance standards of the 

Bells. 

Senator NELSON. Last question, does in your opinion the bill, 

how does it affect the regulatory leverage to spur the Bell companies to open up their markets? 

Mr. TAUZIN. It increases regulatory leverage. The Commission, 

Mr. Powell came before us and asked for exactly what he gets in 

our bill, which is a ten-fold increase in fines, twenty-fold increase 

for repeat bad behavior and the power to go to court under cease 

and desist authority to force the Bells to behave when they misbehave. 

Senator NELSON. OK. Thank you, Mr. Chairman. 

The CHAIRMAN. Chairman Tauzin, the hour is late. The disconnect, Senator Nelson, is from the truth. It is just exactly the opposite of that. Eighty-five percent, it passes the homes all over 

America. It is the lack of demand. 

Yes, there is a monopoly. Cable has got a temporary monopoly. 

The Bell Company has a permanent one. The cable one is by way 

of a franchise fee for 5 to 10 years. The Bell companies do not pay 

a franchise fee. 

The cable company has got to provide governmental services, 

schools and everything else. And they have got to have a good reasonable price or they are going to lose the contract. In fact, there 

is some price overview and changes in the city’s contracts on everything else of that kind. And they know they will lose the contract. 

There never is going to be the end of a Bell Company. 

Mr. TAUZIN. Excuse me, Senator, there is no cable franchise fee 

on the broadband service. 

The CHAIRMAN. Let me tell you this, going right down there, I 

will yield to you in just a second because I have a hard time keeping up. 

The 271 you just gave the excuse about your competition of long 

distance. 271, Senator Conrad Burns asked a question about the 

difference between data and voice. None. Both of you all said absolutely none. 

On Page 18, Section 6, line 13, you repeal 271 for data, and 

thereby since it is no different with voice, you repealed 271 for 

56

both. You go right down to comply. Verizon, Bell South, they are 

already into the third year and that is no 5-year requirement because they are pell-mell trying their best, as Duane Ackerman of 

Bell South says, going as fast as we can. It is profitable. 

And even if they did not comply, the penalties are a joke. They 

have paid 2 billion in penalties——

Mr. TAUZIN. Senator, I’ve got 2 minutes. 

The CHAIRMAN. I will yield in just a second. 

Mr. TAUZIN. No. No. Listen——

The CHAIRMAN. All I ask you to do is, I will give you——

Mr. TAUZIN. I’ve got to vote. 

The CHAIRMAN. All right. You have got to vote. And then, well, 

you have got the authority to the FCC, just and reasonable and everything else. But that power is not given to the FCC except on appeal. And you give the authority to—we had, Billy, a contest for an 

insurance company down in South Carolina. And the winning slogan was, ‘‘Capital Life will save the day if the small print on the 

back don’t take it away.’’ And that is exactly this bill. I had the 

staff study it. I have looked at it. And every time I have said if 

Chairman Tauzin told me now he has got some amendments and 

it will be acceptable and everything else like that, you have got to 

fill it out with your lawyers drawing this darned thing. 

It is still the worst thing I have ever seen because it really does 

turn it over to a total monopoly. 

Mr. TAUZIN. We disagree on that. 

The CHAIRMAN. And I mean, the little bit of competition that the 

cables have given hasn’t gone up at all. 

Mr. TAUZIN. We disagree on that, sir. That’s a valid disagreement. I can only tell you that when we presented our bill to the 

delegation of South Carolina in the House, all but one of the members voted for it. So there is even disagreement within your state. 

The CHAIRMAN. You are right. And in fact I have got way more 

Bell friends in South Carolina. I cannot tell who the AT&T fellow 

is down there. You keep saying I am shilling for AT&T. I do not 

know who represents them in South Carolina. I know all of them 

in Bell South. They are far more influential. 

Mr. TAUZIN. Trust me, Senator, I never said you shill for anyone. 

No one would ever claim that. What I do know is that when we 

presented these amendments, these changes in the bill to the delegation from South Carolina, we were very successful in getting the 

support of the vast majority of the members. Only one voted 

against it. I’m saying that’s a legitimate difference of opinion. Let 

us leave it there and let’s continue to talk and work. I think I’ve 

heard a lot of expression today that—of agreement on the general 

things we want to accomplish. 

And I will reiterate again, Senator, that Mr. Dingell and I are 

absolutely dedicated to working with you and all your members, if 

there are better ideas, better ways to achieve the goals I think we 

have all mutually expressed. 

The CHAIRMAN. Very good. Thank you very much for your appearance. It has been very helpful for us today. 

Senator NELSON. Mr. Chairman, I want to clarify, and as we get 

into the discussion on this, because the suggestion of that chart, I 

am looking at the Federal Communications Commission, third reVerDate 0ct 09 2002 09:53 Dec 05, 2005 Jkt 093635 PO 00000 Frm 00060 Fmt 6633 Sfmt 6601 S:\WPSHR\GPO\DOCS\93635.TXT JACK PsN: JACKF
57

port. And they make a statement on Page 49, ‘‘Analysts estimate 

that high-speed Internet access is available in about 75 to 80 percent of U.S. households via DSL and cable modem service.’’ And so 

there is a disconnect between statements like that and that chart 

that over the course of your hearings I would like to figure it out. 

The CHAIRMAN. Very good, Chairman. The Committee will be in 

recess. Thank you. 

[Whereupon, at 12:15 p.m., the Committee was adjourned.]

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